[Federal Register Volume 76, Number 231 (Thursday, December 1, 2011)]
[Proposed Rules]
[Pages 74854-75420]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-30358]
[[Page 74853]]
Vol. 76
Thursday,
No. 231
December 1, 2011
Part II
Environmental Protection Agency
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40 CFR Parts 85, 86, and 600
Department of Transportation
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National Highway Traffic Safety Administration
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49 CFR Parts 523, 531, 533 et al.
2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions
and Corporate Average Fuel Economy Standards; Proposed Rule
Federal Register / Vol. 76 , No. 231 / Thursday, December 1, 2011 /
Proposed Rules
[[Page 74854]]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 85, 86, and 600
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DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Parts 523, 531, 533, 536, and 537
[EPA-HQ-OAR-2010-0799; FRL-9495-2; NHTSA-2010-0131]
RIN 2060-AQ54; RIN 2127-AK79
2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas
Emissions and Corporate Average Fuel Economy Standards
AGENCY: Environmental Protection Agency (EPA) and National Highway
Traffic Safety Administration (NHTSA).
ACTION: Proposed rule.
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SUMMARY: EPA and NHTSA, on behalf of the Department of Transportation,
are issuing this joint proposal to further reduce greenhouse gas
emissions and improve fuel economy for light-duty vehicles for model
years 2017-2025. This proposal extends the National Program beyond the
greenhouse gas and corporate average fuel economy standards set for
model years 2012-2016. On May 21, 2010, President Obama issued a
Presidential Memorandum requesting that NHTSA and EPA develop through
notice and comment rulemaking a coordinated National Program to reduce
greenhouse gas emissions of light-duty vehicles for model years 2017-
2025. This proposal, consistent with the President's request, responds
to the country's critical need to address global climate change and to
reduce oil consumption. NHTSA is proposing Corporate Average Fuel
Economy standards under the Energy Policy and Conservation Act, as
amended by the Energy Independence and Security Act, and EPA is
proposing greenhouse gas emissions standards under the Clean Air Act.
These standards apply to passenger cars, light-duty trucks, and medium-
duty passenger vehicles, and represent a continued harmonized and
consistent National Program. Under the National Program for model years
2017-2025, automobile manufacturers would be able to continue building
a single light-duty national fleet that satisfies all requirements
under both programs while ensuring that consumers still have a full
range of vehicle choices. EPA is also proposing a minor change to the
regulations applicable to MY 2012-2016, with respect to air conditioner
performance and measurement of nitrous oxides.
DATES: Comments: Comments must be received on or before January 30,
2012. Under the Paperwork Reduction Act, comments on the information
collection provisions must be received by the Office of Management and
Budget (OMB) on or before January 3, 2012. See the SUPPLEMENTARY
INFORMATION section on ``Public Participation'' for more information
about written comments.
Public Hearings: NHTSA and EPA will jointly hold three public
hearings on the following dates: January 17, 2012, in Detroit,
Michigan; January 19, 2012 in Philadelphia, Pennsylvania; and January
24, 2012, in San Francisco, California. EPA and NHTSA will announce the
addresses for each hearing location in a supplemental Federal Register
Notice. The agencies will accept comments to the rulemaking documents,
and NHTSA will also accept comments to the Draft Environmental Impact
Statement (EIS) at these hearings and to Docket No. NHTSA-2011-0056.
The hearings will start at 10 a.m. local time and continue until
everyone has had a chance to speak. See the SUPPLEMENTARY INFORMATION
section on ``Public Participation.'' for more information about the
public hearings.
ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2010-0799 and/or NHTSA-2010-0131, by one of the following methods:
Online: www.regulations.gov: Follow the on-line
instructions for submitting comments.
Email: [email protected]
Fax: EPA: (202) 566-9744; NHTSA: (202) 493-2251.
Mail:
EPA: Environmental Protection Agency, EPA Docket Center
(EPA/DC), Air and Radiation Docket, Mail Code 28221T, 1200 Pennsylvania
Avenue NW., Washington, DC 20460, Attention Docket ID No. EPA-HQ-OAR-
2010-0799. In addition, please mail a copy of your comments on the
information collection provisions to the Office of Information and
Regulatory Affairs, Office of Management and Budget (OMB), Attn: Desk
Officer for EPA, 725 17th St., NW., Washington, DC 20503.
NHTSA: Docket Management Facility, M-30, U.S. Department
of Transportation, West Building, Ground Floor, Rm. W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590.
Hand Delivery:
EPA: Docket Center, (EPA/DC) EPA West, Room B102, 1301
Constitution Ave. NW., Washington, DC, Attention Docket ID No. EPA-HQ-
OAR-2010-0799. Such deliveries are only accepted during the Docket's
normal hours of operation, and special arrangements should be made for
deliveries of boxed information.
NHTSA: West Building, Ground Floor, Rm. W12-140, 1200 New
Jersey Avenue SE, Washington, DC 20590, between 9 a.m. and 4 p.m.
Eastern Time, Monday through Friday, except Federal Holidays.
Instructions: Direct your comments to Docket ID No. EPA-HQ-OAR-
2010-0799 and/or NHTSA-2010-0131. See the SUPPLEMENTARY INFORMATION
section on ``Public Participation'' for more information about
submitting written comments.
Docket: All documents in the dockets are listed in the http://www.regulations.gov index. Although listed in the index, some
information is not publicly available, e.g., confidential business
information (CBI) or other information whose disclosure is restricted
by statute. Certain other material, such as copyrighted material, will
be publicly available in hard copy in EPA's docket, and electronically
in NHTSA's online docket. Publicly available docket materials are
available either electronically in www.regulations.gov or in hard copy
at the following locations: EPA: EPA Docket Center, EPA/DC, EPA West,
Room 3334, 1301 Constitution Ave. NW., Washington, DC. The Public
Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through
Friday, excluding legal holidays. The telephone number for the Public
Reading Room is (202) 566-1744. NHTSA: Docket Management Facility, M-
30, U.S. Department of Transportation, West Building, Ground Floor, Rm.
W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590. The Docket
Management Facility is open between 9 a.m. and 5 p.m. Eastern Time,
Monday through Friday, except Federal holidays.
FOR FURTHER INFORMATION CONTACT: EPA: Christopher Lieske, Office of
Transportation and Air Quality, Assessment and Standards Division,
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI
48105; telephone number: (734) 214-4584; fax number: (734) 214-4816;
email address: [email protected], or contact the Assessment
and Standards Division; email address: [email protected]. NHTSA:
Rebecca Yoon, Office of the Chief Counsel, National Highway Traffic
Safety Administration, 1200 New Jersey
[[Page 74855]]
Avenue SE., Washington, DC 20590. Telephone: (202) 366-2992.
SUPPLEMENTARY INFORMATION:
A. Does this action apply to me?
This action affects companies that manufacture or sell new light-
duty vehicles, light-duty trucks, and medium-duty passenger vehicles,
as defined under EPA's CAA regulations,\1\ and passenger automobiles
(passenger cars) and non-passenger automobiles (light trucks) as
defined under NHTSA's CAFE regulations.\2\ Regulated categories and
entities include:
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\1\ ``Light-duty vehicle,'' ``light-duty truck,'' and ``medium-
duty passenger vehicle'' are defined in 40 CFR 86.1803-01.
Generally, the term ``light-duty vehicle'' means a passenger car,
the term ``light-duty truck'' means a pick-up truck, sport-utility
vehicle, or minivan of up to 8,500 lbs gross vehicle weight rating,
and ``medium-duty passenger vehicle'' means a sport-utility vehicle
or passenger van from 8,500 to 10,000 lbs gross vehicle weight
rating. Medium-duty passenger vehicles do not include pick-up
trucks.
\2\ ``Passenger car'' and ``light truck'' are defined in 49 CFR
part 523.
[GRAPHIC] [TIFF OMITTED] TP01DE11.000
This list is not intended to be exhaustive, but rather provides a
guide regarding entities likely to be regulated by this action. To
determine whether particular activities may be regulated by this
action, you should carefully examine the regulations. You may direct
questions regarding the applicability of this action to the person
listed in FOR FURTHER INFORMATION CONTACT.
B. Public Participation
NHTSA and EPA request comment on all aspects of this joint proposed
rule. This section describes how you can participate in this process.
How do I prepare and submit comments?
In this joint proposal, there are many issues common to both EPA's
and NHTSA's proposals. For the convenience of all parties, comments
submitted to the EPA docket will be considered comments submitted to
the NHTSA docket, and vice versa. An exception is that comments
submitted to the NHTSA docket on NHTSA's Draft Environmental Impact
Statement (EIS) will not be considered submitted to the EPA docket.
Therefore, the public only needs to submit comments to either one of
the two agency dockets, although they may submit comments to both if
they so choose. Comments that are submitted for consideration by one
agency should be identified as such, and comments that are submitted
for consideration by both agencies should be identified as such. Absent
such identification, each agency will exercise its best judgment to
determine whether a comment is submitted on its proposal.
Further instructions for submitting comments to either the EPA or
NHTSA docket are described below.
EPA: Direct your comments to Docket ID No EPA-HQ-OAR-2010-0799.
EPA's policy is that all comments received will be included in the
public docket without change and may be made available online at http://www.regulations.gov, including any personal information provided,
unless
[[Page 74856]]
the comment includes information claimed to be Confidential Business
Information (CBI) or other information whose disclosure is restricted
by statute. Do not submit information that you consider to be CBI or
otherwise protected through http://www.regulations.gov or email. The
http://www.regulations.gov Web site is an ``anonymous access'' system,
which means EPA will not know your identity or contact information
unless you provide it in the body of your comment. If you send an email
comment directly to EPA without going through http://www.regulations.gov your email address will be automatically captured
and included as part of the comment that is placed in the public docket
and made available on the Internet. If you submit an electronic
comment, EPA recommends that you include your name and other contact
information in the body of your comment and with any disk or CD-ROM you
submit. If EPA cannot read your comment due to technical difficulties
and cannot contact you for clarification, EPA may not be able to
consider your comment. Electronic files should avoid the use of special
characters, any form of encryption, and be free of any defects or
viruses. For additional information about EPA's public docket visit the
EPA Docket Center homepage at http://www.epa.gov/epahome/dockets.htm.
NHTSA: Your comments must be written and in English. To ensure that
your comments are correctly filed in the Docket, please include the
Docket number NHTSA-2010-0131 in your comments. Your comments must not
be more than 15 pages long.\3\ NHTSA established this limit to
encourage you to write your primary comments in a concise fashion.
However, you may attach necessary additional documents to your
comments, and there is no limit on the length of the attachments. If
you are submitting comments electronically as a PDF (Adobe) file, we
ask that the documents submitted be scanned using the Optical Character
Recognition (OCR) process, thus allowing the agencies to search and
copy certain portions of your submissions.\4\ Please note that pursuant
to the Data Quality Act, in order for the substantive data to be relied
upon and used by the agency, it must meet the information quality
standards set forth in the OMB and Department of Transportation (DOT)
Data Quality Act guidelines. Accordingly, we encourage you to consult
the guidelines in preparing your comments. OMB's guidelines may be
accessed at http://www.whitehouse.gov/omb/fedreg/reproducible.html.
DOT's guidelines may be accessed at http://www.dot.gov/dataquality.htm.
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\3\ See 49 CFR 553.21.
\4\ Optical character recognition (OCR) is the process of
converting an image of text, such as a scanned paper document or
electronic fax file, into computer-editable text.
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Tips for Preparing Your Comments
When submitting comments, please remember to:
Identify the rulemaking by docket number and other
identifying information (subject heading, Federal Register date and
page number).
Explain why you agree or disagree, suggest alternatives,
and substitute language for your requested changes.
Describe any assumptions and provide any technical
information and/or data that you used.
If you estimate potential costs or burdens, explain how
you arrived at your estimate in sufficient detail to allow for it to be
reproduced.
Provide specific examples to illustrate your concerns, and
suggest alternatives.
Explain your views as clearly as possible, avoiding the
use of profanity or personal threats.
Make sure to submit your comments by the comment period
deadline identified in the DATES section above.
How can I be sure that my comments were received?
NHTSA: If you submit your comments by mail and wish Docket
Management to notify you upon its receipt of your comments, enclose a
self-addressed, stamped postcard in the envelope containing your
comments. Upon receiving your comments, Docket Management will return
the postcard by mail.
How do I submit confidential business information?
Any confidential business information (CBI) submitted to one of the
agencies will also be available to the other agency. However, as with
all public comments, any CBI information only needs to be submitted to
either one of the agencies' dockets and it will be available to the
other. Following are specific instructions for submitting CBI to either
agency.
EPA: Do not submit CBI to EPA through http://www.regulations.gov or
email. Clearly mark the part or all of the information that you claim
to be CBI. For CBI information in a disk or CD ROM that you mail to
EPA, mark the outside of the disk or CD ROM as CBI and then identify
electronically within the disk or CD ROM the specific information that
is claimed as CBI. In addition to one complete version of the comment
that includes information claimed as CBI, a copy of the comment that
does not contain the information claimed as CBI must be submitted for
inclusion in the public docket. Information so marked will not be
disclosed except in accordance with procedures set forth in 40 CFR Part
2.
NHTSA: If you wish to submit any information under a claim of
confidentiality, you should submit three copies of your complete
submission, including the information you claim to be confidential
business information, to the Chief Counsel, NHTSA, at the address given
above under FOR FURTHER INFORMATION CONTACT. When you send a comment
containing confidential business information, you should include a
cover letter setting forth the information specified in our
confidential business information regulation.\5\
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\5\ See 49 CFR part 512.
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In addition, you should submit a copy from which you have deleted
the claimed confidential business information to the Docket by one of
the methods set forth above.
Will the agencies consider late comments?
NHTSA and EPA will consider all comments received before the close
of business on the comment closing date indicated above under DATES. To
the extent practicable, we will also consider comments received after
that date. If interested persons believe that any information that the
agencies place in the docket after the issuance of the NPRM affects
their comments, they may submit comments after the closing date
concerning how the agencies should consider that information for the
final rule. However, the agencies' ability to consider any such late
comments in this rulemaking will be limited due to the time frame for
issuing a final rule.
If a comment is received too late for us to practicably consider in
developing a final rule, we will consider that comment as an informal
suggestion for future rulemaking action.
How can I read the comments submitted by other people?
You may read the materials placed in the docket for this document
(e.g., the comments submitted in response to this document by other
interested persons) at any time by going to http://www.regulations.gov.
Follow the online instructions for accessing the dockets. You may also
read the materials at the EPA Docket Center or NHTSA Docket
[[Page 74857]]
Management Facility by going to the street addresses given above under
ADDRESSES.
How do I participate in the public hearings?
NHTSA and EPA will jointly host three public hearings on the dates
and locations described in the DATES section above. At all hearings,
both agencies will accept comments on the rulemaking, and NHTSA will
also accept comments on the EIS.
If you would like to present testimony at the public hearings, we
ask that you notify the EPA and NHTSA contact persons listed under FOR
FURTHER INFORMATION CONTACT at least ten days before the hearing. Once
EPA and NHTSA learn how many people have registered to speak at the
public hearing, we will allocate an appropriate amount of time to each
participant, allowing time for lunch and necessary breaks throughout
the day. For planning purposes, each speaker should anticipate speaking
for approximately ten minutes, although we may need to adjust the time
for each speaker if there is a large turnout. We suggest that you bring
copies of your statement or other material for the EPA and NHTSA
panels. It would also be helpful if you send us a copy of your
statement or other materials before the hearing. To accommodate as many
speakers as possible, we prefer that speakers not use technological
aids (e.g., audio-visuals, computer slideshows). However, if you plan
to do so, you must notify the contact persons in the FOR FURTHER
INFORMATION CONTACT section above. You also must make arrangements to
provide your presentation or any other aids to NHTSA and EPA in advance
of the hearing in order to facilitate set-up. In addition, we will
reserve a block of time for anyone else in the audience who wants to
give testimony. The agencies will assume that comments made at the
hearings are directed to the NPRM unless commenters specifically
reference NHTSA's EIS in oral or written testimony.
The hearing will be held at a site accessible to individuals with
disabilities. Individuals who require accommodations such as sign
language interpreters should contact the persons listed under FOR
FURTHER INFORMATION CONTACT section above no later than ten days before
the date of the hearing.
NHTSA and EPA will conduct the hearing informally, and technical
rules of evidence will not apply. We will arrange for a written
transcript of the hearing and keep the official record of the hearing
open for 30 days to allow you to submit supplementary information. You
may make arrangements for copies of the transcript directly with the
court reporter.
Table of Contents
I. Overview of Joint EPA/NHTSA Proposed 2017-2025 National PROGRAM
A. Introduction
1. Continuation of the National Program
2. Additional Background on the National Program
3. California's Greenhouse Gas Program
4. Stakeholder Engagement
B. Summary of the Proposed 2017-2025 National Program
1. Joint Analytical Approach
2. Level of the Standards
3. Form of the Standards
4. Program Flexibilities for Achieving Compliance
5. Mid-Term Evaluation
6. Coordinated Compliance
7. Additional Program Elements
C. Summary of Costs and Benefits for the Proposed National
Program
1. Summary of Costs and Benefits for the Proposed NHTSA CAFE
Standards
2. Summary of Costs and Benefits for the Proposed EPA GHG
Standards
D. Background and Comparison of NHTSA and EPA Statutory
Authority
1. NHTSA Statutory Authority
2. EPA Statutory Authority
3. Comparing the Agencies' Authority
II. Joint Technical Work Completed for This Proposal
A. Introduction
B. Developing the Future Fleet for Assessing Costs, Benefits,
and Effects
1. Why Did the Agencies Establish a Baseline and Reference
Vehicle Fleet?
2. How Did the Agencies Develop the Baseline Vehicle Fleet?
3. How Did the Agencies Develop the Projected MY 2017-2025
Vehicle Reference Fleet?
C. Development of Attribute-Based Curve Shapes
1. Why are standards attribute-based and defined by a
mathematical function?
2. What attribute are the agencies proposing to use, and why?
3. What mathematical functions have the agencies previously
used, and why?
4. How have the agencies changed the mathematical functions for
the proposed MYs 2017-2025 standards, and why?
5. What are the agencies proposing for the MYs 2017-2025 curves?
6. Once the agencies determined the appropriate slope for the
sloped part, how did the agencies determine the rest of the
mathematical function?
7. Once the agencies determined the complete mathematical
function shape, how did the agencies adjust the curves to develop
the proposed standards and regulatory alternatives?
D. Joint Vehicle Technology Assumptions
1. What Technologies did the Agencies Consider?
2. How did the Agencies Determine the Costs of Each of these
Technologies?
3. How Did the Agencies Determine the Effectiveness of Each of
these Technologies?
E. Joint Economic and Other Assumptions
F. Air Conditioning Efficiency CO2 Credits and Fuel
Consumption Improvement Values, Off-cycle Reductions, and Full-size
Pickup Trucks
1. Proposed Air Conditioning CO2 Credits and Fuel
Consumption Improvement Values
2. Off-Cycle CO2 Credits
3. Advanced Technology Incentives for Full Sized Pickup Trucks
G. Safety Considerations in Establishing CAFE/GHG Standards
1. Why do the agencies consider safety?
2. How do the agencies consider safety?
3. What is the current state of the research on statistical
analysis of historical crash data?
4. How do the agencies think technological solutions might
affect the safety estimates indicated by the statistical analysis?
5. How have the agencies estimated safety effects for the
proposed standards?
III. EPA Proposal For MYS 2017-2025 Greenhouse Gas Vehicle Standards
A. Overview of EPA Rule
1. Introduction
2. Why is EPA Proposing this Rule?
3. What is EPA Proposing?
4. Basis for the GHG Standards under Section 202(a)
5. Other Related EPA Motor Vehicle Regulations
B. Proposed Model Year 2017-2025 GHG Standards for Light-duty
Vehicles, Light-duty Trucks, and Medium duty Passenger Vehicles
1. What Fleet-wide Emissions Levels Correspond to the
CO2 Standards?
2. What Are the Proposed CO2 Attribute-based
Standards?
3. Mid-Term Evaluation
4. Averaging, Banking, and Trading Provisions for CO2
Standards
5. Small Volume Manufacturer Standards
6. Nitrous Oxide, Methane, and CO2-equivalent
Approaches
7. Small Entity Exemption
8. Additional Leadtime Issues
9. Police and Emergency Vehicle Exemption From CO2
Standards
10. Test Procedures
C. Additional Manufacturer Compliance Flexibilities
1. Air Conditioning Related Credits
2. Incentive for Electric Vehicles, Plug-in Hybrid Electric
Vehicles, and Fuel Cell Vehicles
3. Incentives for ``Game-Changing'' Technologies Including use
of Hybridization and Other Advanced Technologies for Full-Size
Pickup Trucks
4. Treatment of Plug-in Hybrid Electric Vehicles, Dual Fuel
Compressed Natural Gas Vehicles, and Ethanol Flexible Fuel Vehicles
for GHG Emissions Compliance
5. Off-cycle Technology Credits
D. Technical Assessment of the Proposed CO2 Standards
1. How did EPA develop a reference and control fleet for
evaluating standards?
2. What are the Effectiveness and Costs of CO2-
reducing technologies?
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3. How were technologies combined into ``packages'' and what is
the cost and effectiveness of packages?
4. How does EPA Project how a manufacturer would decide between
options to improve CO2 performance to meet a fleet
average standard?
5. Projected Compliance Costs and Technology Penetrations
6. How does the technical assessment support the proposed
CO2 standards as compared to the alternatives has EPA
considered?
7. To what extent do any of today's vehicles meet or surpass the
proposed MY 2017-2025 CO2 footprint-based targets with
current powertrain designs?
E. Certification, Compliance, and Enforcement
1. Compliance Program Overview
2. Compliance With Fleet-Average CO2 Standards
3. Vehicle Certification
4. Useful Life Compliance
5. Credit Program Implementation
6. Enforcement
7. Other Certification Issues
8. Warranty, Defect Reporting, and Other Emission-related
Components Provisions
9. Miscellaneous Technical Amendments and Corrections
10. Base Tire Definition
11. Treatment of Driver-Selectable Modes and Conditions
F. How Would This Proposal Reduce GHG Emissions and Their
Associated Effects?
1. Impact on GHG Emissions
2. Climate Change Impacts From GHG Emissions
3. Changes in Global Climate Indicators Associated With the
Proposal's GHG Emissions Reductions
G. How would the proposal impact non-GHG emissions and their
associated effects?
1. Inventory
2. Health Effects of Non-GHG Pollutants
3. Environmental Effects of Non-GHG Pollutants
4. Air Quality Impacts of Non-GHG Pollutants
5. Other Unquantified Health and Environmental Effects
H. What are the estimated cost, economic, and other impacts of
the proposal?
1. Conceptual Framework for Evaluating Consumer Impacts
2. Costs Associated With the Vehicle Standards
3. Cost per ton of Emissions Reduced
4. Reduction in Fuel Consumption and its Impacts
5. CO2 Emission Reduction Benefits
6. Non-Greenhouse Gas Health and Environmental Impacts
7. Energy Security Impacts
8. Additional Impacts
9. Summary of Costs and Benefits
10. U.S. Vehicle Sales Impacts and Payback Period
11. Employment Impacts
I. Statutory and Executive Order Reviews
J. Statutory Provisions and Legal Authority
IV. NHTSA Proposed Rule for Passenger car and Light Truck Cafe
Standards for Model Years 2017-2025
A. Executive Overview of NHTSA Proposed Rule
1. Introduction
2. Why does NHTSA set CAFE standards for passenger cars and
light trucks?
3. Why is NHTSA proposing CAFE standards for MYs 2017-2025 now?
B. Background
1. Chronology of events since the MY 2012-2016 final rule was
issued
2. How has NHTSA developed the proposed CAFE standards since the
President's announcement?
C. Development and Feasibility of the Proposed Standards
1. How was the baseline vehicle fleet developed?
2. How were the technology inputs developed?
3. How did NHTSA develop its economic assumptions?
4. How does NHTSA use the assumptions in its modeling analysis?
D. Statutory Requirements
1. EPCA, as Amended by EISA
2. Administrative Procedure Act
3. National Environmental Policy Act
E. What are the proposed CAFE standards?
1. Form of the Standards
2. Passenger Car Standards for MYs 2017-2025
3. Minimum Domestic Passenger Car Standards
4. Light Truck Standards
F. How do the proposed standards fulfill NHTSA's statutory
obligations?
1. What are NHTSA's statutory obligations?
2. How did the agency balance the factors for this NPRM?
G. Impacts of the Proposed CAFE Standards
1. How will these standards improve fuel economy and reduce GHG
emissions for MY 2017-2025 vehicles?
2. How will these standards improve fleet-wide fuel economy and
reduce GHG emissions beyond MY 2025?
3. How will these proposed standards impact non-GHG emissions
and their associated effects?
4. What are the estimated costs and benefits of these proposed
standards?
5. How would these proposed standards impact vehicle sales?
6. Social Benefits, Private Benefits, and Potential Unquantified
Consumer Welfare Impacts of the Proposed Standards
7. What other impacts (quantitative and unquantifiable) will
these proposed standards have?
H. Vehicle Classification
I. Compliance and Enforcement
1. Overview
2. How does NHTSA determine compliance?
3. What compliance flexibilities are available under the CAFE
program and how do manufacturers use them?
4. What new incentives are being added to the CAFE program for
MYs 2017-2025?
5. Other CAFE enforcement issues
J. Regulatory notices and analyses
1. Executive Order 12866, Executive Order 13563, and DOT
Regulatory Policies and Procedures
2. National Environmental Policy Act
3. Regulatory Flexibility Act
4. Executive Order 13132 (Federalism)
5. Executive Order 12988 (Civil Justice Reform)
6. Unfunded Mandates Reform Act
7. Regulation Identifier Number
8. Executive Order 13045
9. National Technology Transfer and Advancement Act
10. Executive Order 13211
11. Department of Energy Review
12. Plain Language
13. Privacy Act
I. Overview of Joint EPA/NHTSA Proposed 2017-2025 National Program
Executive Summary
EPA and NHTSA are each announcing proposed rules that call for
strong and coordinated Federal greenhouse gas and fuel economy
standards for passenger cars, light-duty trucks, and medium-duty
passenger vehicles (hereafter light-duty vehicles or LDVs). Together,
these vehicle categories, which include passenger cars, sport utility
vehicles, crossover utility vehicles, minivans, and pickup trucks,
among others, are presently responsible for approximately 60 percent of
all U.S. transportation-related greenhouse gas (GHG) emissions and fuel
consumption. This proposal would extend the National Program of Federal
light-duty vehicle GHG emissions and corporate average fuel economy
(CAFE) standards to model years (MYs) 2017-2025. This proposed
coordinated program would achieve important reductions in GHG emissions
and fuel consumption from the light-duty vehicle part of the
transportation sector, based on technologies that either are
commercially available or that the agencies project will be
commercially available in the rulemaking timeframe and that can be
incorporated at a reasonable cost. Higher initial vehicle costs will be
more than offset by significant fuel savings for consumers over the
lives of the vehicles covered by this rulemaking.
This proposal builds on the success of the first phase of the
National Program to regulate fuel economy and GHG emissions from U.S.
light-duty vehicles, which established strong and coordinated standards
for model years (MY) 2012-2016. As with the first phase of the National
Program, collaboration with California Air Resources Board (CARB) and
with automobile manufacturers and other stakeholders has been a key
element in developing the agencies' proposed rules. Continuing the
National Program would ensure that all manufacturers can build a single
fleet of U.S. vehicles that would satisfy all requirements under both
programs as well as under California's
[[Page 74859]]
program, helping to reduce costs and regulatory complexity while
providing significant energy security and environmental benefits.
Combined with the standards already in effect for MYs 2012-2016, as
well as the MY 2011 CAFE standards, the proposed standards would result
in MY 2025 light-duty vehicles with nearly double the fuel economy, and
approximately one-half of the GHG emissions compared to MY 2010
vehicles--representing the most significant federal action ever taken
to reduce GHG emissions and improve fuel economy in the U.S. EPA is
proposing standards that are projected to require, on an average
industry fleet wide basis, 163 grams/mile of carbon dioxide
(CO2) in model year 2025, which is equivalent to 54.5 mpg if
this level were achieved solely through improvements in fuel
efficiency.\6\ Consistent with its statutory authority, NHTSA is
proposing passenger car and light truck standards for MYs 2017-2025 in
two phases. The first phase, from MYs 2017-2021, includes proposed
standards that are projected to require, on an average industry fleet
wide basis, 40.9 mpg in MY 2021. The second phase of the CAFE program,
from MYs 2022-2025, represents conditional \7\ proposed standards that
are projected to require, on an average industry fleet wide basis, 49.6
mpg in model year 2025. Both the EPA and NHTSA standards are projected
to be achieved through a range of technologies, including improvements
in air conditioning efficiency, which reduces both GHG emissions and
fuel consumption; the EPA standards also are projected to be achieved
with the use of air conditioning refrigerants with a lower global
warming potential (GWP), which reduce GHGs (i.e., hydrofluorocarbons)
but do not improve fuel economy. The agencies are proposing separate
standards for passenger cars and trucks, based on a vehicle's size or
``footprint.'' For the MYs 2022-2025 standards, EPA and NHTSA are
proposing a comprehensive mid-term evaluation and agency decision-
making process, given both the long time frame and NHTSA's obligation
to conduct a separate rulemaking in order to establish final standards
for vehicles for those model years.
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\6\ Real-world CO2 is typically 25 percent higher and
real-world fuel economy is typically 20 percent lower than the
CO2 and CAFE compliance values discussed here. The
reference to CO2 here refers to CO2 equivalent
reductions, as this included some degree of reductions in greenhouse
gases other than CO2, as one part of the air conditioning
related reductions.
\7\ By ``conditional,'' NHTSA means to say that the proposed
standards for MYs 2022-2025 represent the agency's current best
estimate of what levels of stringency would be maximum feasible in
those model years, but in order for the standards for those model
years to be legally binding a subsequent rulemaking must be
undertaken by the agency at a later time. See Section IV for more
information.
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From a societal standpoint, this second phase of the National
Program is projected to save approximately 4 billion barrels of oil and
2 billion metric tons of GHG emissions over the lifetimes of those
vehicles sold in MY 2017-2025. The agencies estimate that fuel savings
will far outweigh higher vehicle costs, and that the net benefits to
society of the MYs 2017-2025 National Program will be in the range of
$311 billion to $421 billion (7 and 3 percent discount rates,
respectively) over the lifetimes of those vehicles sold in MY 2017-
2025.
These proposed standards would have significant savings for
consumers at the pump. Higher costs for new vehicle technology will
add, on average, about $2000 for consumers who buy a new vehicle in MY
2025. Those consumers who drive their MY 2025 vehicle for its entire
lifetime will save, on average, $5200 to $6600 (7 and 3 percent
discount rates, respectively) in fuel savings, for a net lifetime
savings of $3000 to $4400. For those consumers who purchase their new
MY 2025 vehicle with cash, the discounted fuel savings will offset the
higher vehicle cost in less than 4 years, and fuel savings will
continue for as long as the consumer owns the vehicle. Those consumers
that buy a new vehicle with a typical 5-year loan will benefit from an
average monthly cash flow savings of about $12 during the loan period,
or about $140 per year, on average. So the consumer would benefit
beginning at the time of purchase, since the increased monthly fuel
savings would more than offset the higher monthly payment due to the
higher incremental vehicle cost.
The agencies have designed the proposed standards to preserve
consumer choice--that is, the proposed standards should not affect
consumers' opportunity to purchase the size of vehicle with the
performance, utility and safety features that meets their needs. The
standards are based on a vehicle's size, or footprint--that is,
consistent with their general performance and utility needs, larger
vehicles have numerically less stringent fuel economy/GHG emissions
targets and smaller vehicles have more stringent fuel economy/GHG
emissions targets, although since the standards are fleet average
standards, no specific vehicle must meet a target. Thus, consumers will
be able to continue to choose from the same mix of vehicles that are
currently in the marketplace.
The agencies' believe there is a wide range of technologies
available for manufacturers to consider in reducing GHG emissions and
improving fuel economy. The proposals allow for long-term planning by
manufacturers and suppliers for the continued development and
deployment across their fleets of fuel saving and emissions-reducing
technologies. The agencies believe that advances in gasoline engines
and transmissions will continue for the foreseeable future, and that
there will be continual improvement in other technologies, including
vehicle weight reduction, lower tire rolling resistance, improvements
in vehicle aerodynamics, diesel engines, and more efficient vehicle
accessories. The agencies also expect to see increased electrification
of the fleet through the expanded production of stop/start, hybrid,
plug-in hybrid and electric vehicles. Finally, the agencies expect that
vehicle air conditioners will continue to improve by becoming more
efficient and by increasing the use of alternative refrigerants. Many
of these technologies are already available today, and manufacturers
will be able to meet the standards through significant efficiency
improvements in these technologies, as well as a significant
penetration of these and other technologies across the fleet. Auto
manufacturers may also introduce new technologies that we have not
considered for this rulemaking analysis, which could make possible
alternative, more cost-effective paths to compliance.
A. Introduction
1. Continuation of the National Program
EPA and NHTSA are each announcing proposed rules that call for
strong and coordinated Federal greenhouse gas and fuel economy
standards for passenger cars, light-duty trucks, and medium-duty
passenger vehicles (hereafter light-duty vehicles or LDVs). Together,
these vehicle categories, which include passenger cars, sport utility
vehicles, crossover utility vehicles, minivans, and pickup trucks, are
presently responsible for approximately 60 percent of all U.S.
transportation-related greenhouse gas emissions and fuel consumption.
The proposal would extend the National Program of Federal light-duty
vehicle greenhouse gas (GHG) emissions and corporate average fuel
economy (CAFE) standards to model years (MYs) 2017-2025. The
coordinated program being proposed would achieve important reductions
of greenhouse gas (GHG) emissions and fuel consumption from the light-
duty vehicle part of the
[[Page 74860]]
transportation sector, based on technologies that either are
commercially available or that the agencies project will be
commercially available in the rulemaking timeframe and that can be
incorporated at a reasonable cost.
In working together to develop the next round of standards for MYs
2017-2025, NHTSA and EPA are building on the success of the first phase
of the National Program to regulate fuel economy and GHG emissions from
U.S. light-duty vehicles, which established the strong and coordinated
standards for model years (MY) 2012-2016. As for the MYs 2012-2016
rulemaking, collaboration with California Air Resources Board (CARB)
and with industry and other stakeholders has been a key element in
developing the agencies' proposed rules. Continuing the National
Program would ensure that all manufacturers can build a single fleet of
U.S. vehicles that would satisfy all requirements under both programs
as well as under California's program, helping to reduce costs and
regulatory complexity while providing significant energy security and
environmental benefits.
The agencies have been developing the basis for these joint
proposed standards almost since the conclusion of the rulemaking
establishing the first phase of the National Program. After much
research and deliberation by the agencies, along with CARB and other
stakeholders, President Obama announced plans for these proposed rules
on July 29, 2011 and NHTSA and EPA issued a Supplemental Notice of
Intent (NOI) outlining the agencies' plans for proposing the MY 2017-
2025 standards and program.\8\ This July NOI built upon the extensive
analysis conducted by the agencies over the past year, including an
initial technical assessment report and NOI issued in September 2010,
and a supplemental NOI issued in December 2010 (discussed further
below). The State of California and thirteen auto manufacturers
representing over 90 percent of U.S. vehicle sales provided letters of
support for the program concurrent with the Supplemental NOI.\9\ The
United Auto Workers (UAW) also supported the announcement,\10\ as well
as many consumer and environmental groups. As envisioned in the
Presidential announcement and Supplemental NOI, this proposal sets
forth proposed MYs 2017-2025 standards as well as detailed supporting
analysis for those standards and regulatory alternatives for public
review and comment. The program that the agencies are proposing will
spur the development of a new generation of clean cars and trucks
through innovative technologies and manufacturing that will, in turn,
spur economic growth and create high-quality domestic jobs, enhance our
energy security, and improve our environment. Consistent with Executive
Order 13563, this proposal was developed with early consultation with
stakeholders, employs flexible regulatory approaches to reduce burdens,
maintains freedom of choice for the public, and helps to harmonize
federal and state regulations.
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\8\ 76 FR 48758 (August 9, 2011).
\9\ Commitment letters are available at http://www.epa.gov/otaq/climate/regulations.htm and at http://www.nhtsa.gov/fuel-economy
(last accessed Aug. 24, 2011).
\10\ The UAW's support was expressed in a statement on July 29,
2011, which can be found at http://www.uaw.org/articles/uaw-supports-administration-proposal-light-duty-vehicle-cafe-and-greenhouse-gas-emissions-r (last accessed September 19, 2011).
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As described below, NHTSA and EPA are proposing a continuation of
the National Program that the agencies believe represents the
appropriate levels of fuel economy and GHG emissions standards for
model years 2017-2025, given the technologies that the agencies
anticipate will be available for use on these vehicles and the
agencies' understanding of the cost and manufacturers' ability to apply
these technologies during that time frame, and consideration of other
relevant factors. Under this joint rulemaking, EPA is proposing GHG
emissions standards under the Clean Air Act (CAA), and NHTSA is
proposing CAFE standards under EPCA, as amended by the Energy
Independence and Security Act of 2007 (EISA). This joint rulemaking
proposal reflects a carefully coordinated and harmonized approach to
implementing these two statutes, in accordance with all substantive and
procedural requirements imposed by law.\11\
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\11\ For NHTSA, this includes the requirements of the National
Environmental Policy Act (NEPA).
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The proposed approach allows for long-term planning by
manufacturers and suppliers for the continued development and
deployment across their fleets of fuel saving and emissions-reducing
technologies. NHTSA's and EPA's technology assessment indicates there
is a wide range of technologies available for manufacturers to consider
in reducing GHG emissions and improving fuel economy. The agencies
believe that advances in gasoline engines and transmissions will
continue for the foreseeable future, which is a view that is supported
in the literature and amongst the vehicle manufacturers and
suppliers.\12\ The agencies also believe that there will be continual
improvement in other technologies including reductions in vehicle
weight, lower tire rolling resistance, improvements in vehicle
aerodynamics, diesel engines, and more efficient vehicle accessories.
The agencies also expect to see increased electrification of the fleet
through the expanded production of stop/start, hybrid, plug-in hybrid
and electric vehicles.\13\ Finally, the agencies expect that vehicle
air conditioners will continue to improve by becoming more efficient
and by increasing the use of alternative refrigerants. Many of these
technologies are already available today, and EPA's and NHTSA's
assessments are that manufacturers will be able to meet the standards
through significant efficiency improvements in these technologies as
well as a significant penetration of these and other technologies
across the fleet. We project that these potential compliance pathways
for manufacturers will result in significant benefits to consumers and
to society, as quantified below. Manufacturers may also introduce new
technologies that we have not considered for this rulemaking analysis,
which could make possible alternative, more cost-effective paths to
compliance.
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\12\ There are a number of competing gasoline engine
technologies, with one in particular that the agencies project will
be common beyond 2016. This is the gasoline direct injection and
downsized engines equipped with turbochargers and cooled exhaust gas
recirculation, which has performance characteristics similar to that
of larger, less efficient engines. Paired with these engines, the
agencies project that advanced transmissions (such as automatic and
dual clutch transmissions with eight forward speeds) and higher
efficiency gearboxes will provide significant improvements.
Transmissions with eight or more speeds can be found in the fleet
today in very limited production, and while they are expected to
penetrate further by 2016, we anticipate that by 2025 these will be
the dominant transmissions in new vehicle sales.
\13\ For example, while today less than three percent of annual
vehicle sales are strong hybrids, plug-in hybrids and all electric
vehicles, by 2025 we estimate these technologies could represent
nearly 15 percent of new sales.
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As discussed further below, as with the standards for MYs 2012-
2016, the agencies believe that the proposed standards would continue
to preserve consumer choice, that is, the proposed standards should not
affect consumers' opportunity to purchase the size of vehicle that
meets their needs. NHTSA and EPA are proposing to continue standards
based on vehicle footprint, where smaller vehicles have relatively more
stringent standards, and larger vehicles have less stringent standards,
so there should not be a significant effect on the relative
availability of different size vehicles in the fleet.
[[Page 74861]]
Additionally, as with the standards for MYs 2012-2016, the agencies
believe that the proposed standards should not have a negative effect
on vehicle safety, as it relates to vehicle footprint and mass as
described in Section II.C and II.G below, respectively.
We note that as part of this rulemaking, given the long time frame
at issue in setting standards for MY 2022-2025 light-duty vehicles, the
agencies are discussing a comprehensive mid-term evaluation and agency
decision-making process. NHTSA has a statutory obligation to conduct a
separate de novo rulemaking in order to establish final standards for
vehicles for the 2022-2025 model years and would conduct the mid-term
evaluation as part of that rulemaking, and EPA is proposing regulations
that address the mid-term evaluation. The mid-term evaluation will
assess the appropriateness of the MY 2022-2025 standards considered in
this rulemaking, based on an updated assessment of all the factors
considered in setting the standards and the impacts of those factors on
the manufacturers' ability to comply. NHTSA and EPA fully expect to
conduct this mid-term evaluation in coordination with the California
Air Resources Board, given our interest in a maintaining a National
Program to address GHGs and fuel economy. Further discussion of the
mid-term evaluation is found later in this section, as well as in
Sections III and IV.
Based on the agencies' analysis, the National Program standards
being proposed are currently projected to reduce GHGs by approximately
2 billion metric tons and save 4 billion barrels of oil over the
lifetime of MYs 2017-2025 vehicles relative to the MY 2016 standard
curves \14\ already in place. The average cost for a MY 2025 vehicle to
meet the standards is estimated to be about $2,000 compared to a
vehicle that would meet the level of the MY 2016 standards in MY 2025.
However, fuel savings for consumers are expected to more than offset
the higher vehicle costs. The typical driver would save a total of
$5,200 to $6,600 (7 percent and 3 percent discount rate, respectively)
in fuel costs over the lifetime of a MY 2025 vehicle and, even after
accounting for the higher vehicle cost, consumers would save a net
$3,000 to $4,400 (7 percent and 3 percent discount rate, respectively)
over the vehicle's lifetime. Further, consumers who buy new vehicles
with cash would save enough in lower fuel costs after less than 4 years
(at either 7 percent or 3 percent discount rate) of owning a MY 2025
vehicle to offset the higher upfront vehicle costs, while consumers who
buy with a 5-year loan would save more each month on fuel than the
increased amount they would spend on the higher monthly loan payment,
beginning in the first month of ownership.
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\14\ The calculation of GHG reductions and oil savings is
relative to a future in which the MY 2016 standards remain in place
for MYs 2017-2025 and manufacturers comply on average at those
levels.
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Continuing the National Program has both energy security and
climate change benefits. Climate change is widely viewed as a
significant long-term threat to the global environment. EPA has found
that elevated atmospheric concentrations of six greenhouse gases--
carbon dioxide, methane, nitrous oxide, hydrofluorocarbons,
perflurocarbons, and sulfur hexafluoride--taken in combination endanger
both the public health and the public welfare of current and future
generations. EPA further found that the combined emissions of these
greenhouse gases from new motor vehicles and new motor vehicle engines
contribute to the greenhouse gas air pollution that endangers public
health and welfare. 74 FR 66496 (Dec. 15, 2009). As summarized in EPA's
Endangerment and Cause or Contribute Findings under Section 202(a) of
the Clear Air Act, anthropogenic emissions of GHGs are very likely (90
to 99 percent probability) the cause of most of the observed global
warming over the last 50 years.\15\ Mobile sources emitted 31 percent
of all U.S. GHGs in 2007 (transportation sources, which do not include
certain off-highway sources, account for 28 percent) and have been the
fastest-growing source of U.S. GHGs since 1990.\16\ Mobile sources
addressed in the endangerment and contribution findings under CAA
section 202(a)--light-duty vehicles, heavy-duty trucks, buses, and
motorcycles--accounted for 23 percent of all U.S. GHG in 2007.\17\
Light-duty vehicles emit CO2, methane, nitrous oxide, and
hydrofluorocarbons and are responsible for nearly 60 percent of all
mobile source GHGs and over 70 percent of Section 202(a) mobile source
GHGs. For light-duty vehicles in 2007, CO2 emissions
represent about 94 percent of all greenhouse emissions (including
HFCs), and the CO2 emissions measured over the EPA tests
used for fuel economy compliance represent about 90 percent of total
light-duty vehicle GHG emissions.18 19
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\15\ 74 FR 66,496,-66,518, December 18, 2009; ``Technical
Support Document for Endangerment and Cause or Contribute Findings
for Greenhouse Gases Under Section 202(a) of the Clean Air Act''
Docket: EPA-HQ-OAR-2009-0472-11292, http://epa.gov/climatechange/endangerment.html.
\16\ U.S. Environmental Protection Agency. 2009. Inventory of
U.S. Greenhouse Gas Emissions and Sinks: 1990-2007. EPA 430-R-09-
004. Available at http://epa.gov/climatechange/emissions/downloads09/GHG2007entire_report-508.pdf.
\17\ U.S. EPA. 2009 Technical Support Document for Endangerment
and Cause or Contribute Findings for Greenhouse Gases under Section
202(a) of the Clean Air Act. Washington, DC. pp. 180-194. Available
at http://epa.gov/climatechange/endangerment/downloads/Endangerment%20TSD.pdf.
\18\ U.S. Environmental Protection Agency. 2009. Inventory of
U.S. Greenhouse Gas Emissions and Sinks: 1990-2007. EPA 430-R-09-
004. Available at http://epa.gov/climatechange/emissions/downloads09/GHG2007entire_report-508.pdf.
\19\ U.S. Environmental Protection Agency. RIA, Chapter 2.
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Improving our energy and national security by reducing our
dependence on foreign oil has been a national objective since the first
oil price shocks in the 1970s. Net petroleum imports accounted for
approximately 51 percent of U.S. petroleum consumption in 2009.\20\
World crude oil production is highly concentrated, exacerbating the
risks of supply disruptions and price shocks as the recent unrest in
North Africa and the Persian Gulf highlights. Recent tight global oil
markets led to prices over $100 per barrel, with gasoline reaching as
high as $4 per gallon in many parts of the U.S., causing financial
hardship for many families and businesses. The export of U.S. assets
for oil imports continues to be an important component of the
historically unprecedented U.S. trade deficits. Transportation
accounted for about 71 percent of U.S. petroleum consumption in
2009.\21\ Light-duty vehicles account for about 60 percent of
transportation oil use, which means that they alone account for about
40 percent of all U.S. oil consumption.
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\20\ Energy Information Administration, ``How dependent are we
on foreign oil?'' Available at http://www.eia.gov/energy_in_brief/foreign_oil_dependence.cfm (last accessed August 28, 2011).
\21\ Energy Information Administration, Annual Energy Outlook
2011, ``Oil/Liquids.'' Available at http://www.eia.gov/forecasts/aeo/MT_liquidfuels.cfm (last accessed August 28, 2011).
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The automotive market is becoming increasingly global. The U.S.
auto companies and U.S. suppliers produce and sell automobiles and
automotive components around the world, and foreign auto companies
produce and sell in the U.S. As a result, the industry has become
increasingly competitive. Staying at the cutting edge of automotive
technology while maintaining profitability and consumer acceptance has
become increasingly important for the sustainability of auto companies.
The proposed standards cover model years 2017-2025 for passenger cars
and light-duty trucks sold in the United States. Many other countries
and regions around the world have in place fuel economy or
CO2
[[Page 74862]]
emission standards for light-duty vehicles. In addition, the European
Union is currently discussing more stringent CO2 standards
for 2020, and the Japanese government has recently issued a draft
proposal for new fuel efficiency standards for 2020. The overall trend
is clear--globally many of the major economic countries are increasing
the stringency of their fuel economy or CO2 emission
standards for light-duty vehicles. When considering this common trend,
the proposed CAFE and CO2 standards for MY 2017-2025 may
offer some advantages for U.S.-based automotive companies and
suppliers. In order to comply with the proposed standards, U.S. firms
will need to invest significant research and development dollars and
capital in order to develop and produce the technologies needed to
reduce CO2 emissions and improve fuel economy. Companies
have limited budgets for research and development programs. As
automakers seek greater commonality across the vehicles they produce
for the domestic and foreign markets, improving fuel economy and
reducing GHGs in U.S. vehicles should have spillovers to foreign
production, and vice versa, thus yielding the ability to amortize
investment in research and production over a broader product and
geographic spectrum. To the extent that the technologies needed to meet
the standards contained in this proposal can also be used to comply
with the fuel economy and CO2 standards in other countries,
this can help U.S. firms in the global automotive market, as the U.S.
firms will be able to focus their available research and development
funds on a common set of technologies that can be used both
domestically as well as internationally.
2. Additional Background on the National Program
Following the successful adoption of a National Program of federal
standards for greenhouse gas emissions (GHG) and fuel economy standards
for model years (MY) 2012-2016 light duty vehicles, President Obama
issued a Memorandum on May 21, 2010 requesting that the National
Highway Traffic Safety Administration (NHTSA), on behalf of the
Department of Transportation, and the Environmental Protection Agency
(EPA) work together to develop a national program for model years 2017-
2025. Specifically, he requested that the agencies develop ``* * * a
coordinated national program under the CAA [Clean Air Act] and the EISA
[Energy Independence and Security Act of 2007] to improve fuel
efficiency and to reduce greenhouse gas emissions of passenger cars and
light-duty trucks of model years 2017-2025.'' \22\ The President
recognized that our country could take a leadership role in addressing
the global challenges of improving energy security and reducing
greenhouse gas pollution, stating that ``America has the opportunity to
lead the world in the development of a new generation of clean cars and
trucks through innovative technologies and manufacturing that will spur
economic growth and create high-quality domestic jobs, enhance our
energy security, and improve our environment.''
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\22\ The Presidential Memorandum is found at: http://www.whitehouse.gov/the-press-office/presidential-memorandum-regarding-fuel-efficiency-standards. For the reader's reference, the
President also requested the Administrators of EPA and NHTSA to
issue joint rules under the CAA and EISA to establish fuel
efficiency and greenhouse gas emissions standards for commercial
medium-and heavy-duty on-highway vehicles and work trucks beginning
with the 2014 model year. The agencies recently promulgated final
GHG and fuel efficiency standards for heavy duty vehicles and
engines for MYs 2014-2018. 76 FR 57106 (September 15, 2011).
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The Presidential Memorandum stated ``The program should also seek
to achieve substantial annual progress in reducing transportation
sector greenhouse gas emissions and fossil fuel consumption, consistent
with my Administration's overall energy and climate security goals,
through the increased domestic production and use of existing,
advanced, and emerging technologies, and should strengthen the industry
and enhance job creation in the United States.'' Among other things,
the agencies were tasked with researching and then developing standards
for MYs 2017 through 2025 that would be appropriate and consistent with
EPA's and NHTSA's respective statutory authorities, in order to
continue to guide the automotive sector along the road to reducing its
fuel consumption and GHG emissions, thereby ensuring corresponding
energy security and environmental benefits. During the public comment
period for the MY 2012-2016 proposed rulemaking, many stakeholders,
including automakers, encouraged NHTSA and EPA to begin working toward
standards for MY 2017 and beyond in order to maintain a single
nationwide program. Several major automobile manufacturers and CARB
sent letters to EPA and NHTSA in support of a MYs 2017 to 2025
rulemaking initiative as outlined in the President's May 21, 2010
announcement.\23\
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\23\ These letters of support in response to the May 21, 2010
Presidential Memorandum are available at http://www.epa.gov/otaq/climate/regulations.htm#prez and http://www.nhtsa.gov/Laws+&+Regulations/CAFE+-+Fuel+Economy/Stakeholder+Commitment+Letters (last accessed August 28, 2011).
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The President's memo requested that the agencies, ``work with the
State of California to develop by September 1, 2010, a technical
assessment to inform the rulemaking process * * *.'' As a first step in
responding to the President's request, the agencies collaborated with
CARB to prepare an Interim Joint Technical Assessment Report (TAR) to
inform the rulemaking process and provide an initial technical
assessment for that work. NHTSA, EPA, and CARB issued the joint
Technical Assessment Report consistent with Section 2(a) of the
Presidential Memorandum.\24\ In developing the technical assessment,
EPA, NHTSA, and CARB held numerous meetings with a wide variety of
stakeholders including the automobile original equipment manufacturers
(OEMs), automotive suppliers, non-governmental organizations, states
and local governments, infrastructure providers, and labor unions. The
Interim Joint TAR provided an overview of key stakeholder input,
addressed other topics noted in the Presidential memorandum, and EPA's
and NHTSA's initial assessment of benefits and costs of a range of
stringencies of future standards.
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\24\ This Interim Joint Technical Assessment Report (TAR) is
available at http://www.epa.gov/otaq/climate/regulations/ldv-ghg-tar.pdf and http://www.nhtsa.gov/staticfiles/rulemaking/pdf/cafe/2017+CAFE-GHG_Interim_TAR2.pdf.Section 2(a) of the Presidential
Memorandum requested that EPA and NHTSA ``Work with the State of
California to develop by September 1, 2010, a technical assessment
to inform the rulemaking process, reflecting input from an array of
stakeholders on relevant factors, including viable technologies,
costs, benefits, lead time to develop and deploy new and emerging
technologies, incentives and other flexibilities to encourage
development and deployment of new and emerging technologies, impacts
on jobs and the automotive manufacturing base in the United States,
and infrastructure for advanced vehicle technologies.''
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In accordance with the Presidential Memorandum, NHTSA and EPA also
issued a joint Notice of Intent to Issue a Proposed Rulemaking
(NOI).\25\ The September 2010 NOI highlighted the results of the
analyses contained in the Interim Joint TAR, provided an overview of
key program design elements, and announced plans for initiating the
joint rulemaking to improve the fuel efficiency and reduce the GHG
emissions of passenger cars and light-duty trucks built in MYs 2017-
2025. The agencies requested comments on the September NOI and
accompanying Interim Joint TAR.
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\25\ 75 FR 62739, October 13, 2010.
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The Interim Joint TAR contained an initial fleet-wide analysis of
improvements in overall average GHG emissions and equivalent fuel
economy
[[Page 74863]]
levels. For purposes of an initial assessment, this range was intended
to represent a reasonably broad range of stringency increases for
potential future GHG emissions standards, and was also consistent with
the increases suggested by CARB in its letter of commitment in response
to the President's memorandum.26 27 The TAR evaluated a
range of potential stringency scenarios through model year 2025,
representing a 3, 4, 5, and 6 percent per year estimated decrease in
GHG levels from a model year 2016 fleet-wide average of 250 gram/mile
(g/mi). Thus, the model year 2025 scenarios analyzed in the Interim
Joint TAR ranged from 190 g/mi on an estimated fleet-wide average
(calculated to be equivalent to 47 miles per gallon, mpg, if all
improvements were made with fuel economy-improving technologies) under
the 3 percent per year reduction scenario, to 143 g/mi on an estimated
fleet-wide average (calculated to be equivalent to 62 mpg, if all
improvements were made with fuel economy-improving technologies) under
the 6 percent per year scenario.\28\ For each of these scenarios, the
TAR also evaluated four pre-defined ``technological pathways'' by which
these levels could be attained. These pathways were meant to represent
ways that the industry as a whole could increase fuel economy and
reduce greenhouse gas emissions, and did not represent ways that
individual manufacturers would be required to or necessarily would
employ in responding to future standards. Each defined technology
pathway emphasized a different mix of advanced technologies, by
assuming various degrees of penetration of advanced gasoline
technologies, mass reduction, hybrid electric vehicles (HEVs), plug-in
hybrids (PHEVs), and electric vehicles (EVs).
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\26\ 75 FR at 62744-45.
\27\ Statement of the California Air Resources Board Regarding
Future Passenger Vehicle Greenhouse Gas Emissions Standards,
California Air Resources Board, May 21, 2010. Available at: http://www.epa.gov/otaq/climate/regulations.htm.
\28\ These levels correspond to on-road values of 37 to 50 mpg,
respectively, recognizing that on-road fuel economy tends to be
about 20 percent worse than calculated mpg values based on the CAFE
test cycle. We note, however, that because these mpg values are
translated from CO2e values that include reductions in
hydrofluorocarbon (HFC) leakage due to use of advanced refrigerants
and leakage improvements, therefore these numbers are not as
representative of either CAFE test cycle or real-world mpg.
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Manufacturers and others commented extensively on the NOI and
Interim Joint TAR on a variety of topics, including the stringency of
the standards, program design elements, the effect of potential
standards on vehicle safety, and the TAR's discussion of technology
costs, effectiveness, and feasibility. In response, the agencies and
CARB spent the next several months continuing to gather information
from the industry and others in response to the agencies' initial
analytical efforts. To aid the public's understanding of some of the
key issues facing the agencies in developing the proposed rule, EPA and
NHTSA also issued a follow-on Supplemental NOI in November 2010.\29\
The Supplemental NOI highlighted many of the key comments the agencies
received in response to the September NOI and Interim Joint TAR, and
summarized some of the key themes from the comments and the additional
stakeholder meetings. We note, as highlighted in the November
Supplemental NOI, that there continued to be widespread stakeholder
support for continuing the National Program for improved fuel economy
and greenhouse gas standards for model years 2017-2025. The November
Supplemental NOI also provided an overview of many of the key technical
analyses the agencies planned in support the proposed rule.
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\29\ 75 FR 76337, December 8, 2010.
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After issuing the November 2010 Supplemental NOI, EPA, NHTSA and
CARB continued studies on technology cost and effectiveness and more
in-depth and comprehensive analysis of the issues. In addition to this
work, the agencies continued meeting with stakeholders, including with
manufacturers, manufacturer organizations, automotive suppliers, a
labor union, environmental groups, consumer interest groups, and
investment organizations. As discussed above, on July 29, 2011
President Obama announced plans for these proposed rules and NHTSA and
EPA issued a Supplemental Notice of Intent (NOI) outlining the
agencies' plans for proposing the MY 2017-2025 standards and program.
3. California's Greenhouse Gas Program
In 2004, the California Air Resources Board (CARB) approved
standards for new light-duty vehicles, regulating the emission of
CO2 and other GHGs. Thirteen states and the District of
Columbia, comprising approximately 40 percent of the light-duty vehicle
market, adopted California's standards. On June 30, 2009, EPA granted
California's request for a waiver of preemption under the CAA with
respect to these standards.\30\ The granting of the waiver permits
California and the other states to proceed with implementing the
California emission standards for MYs 2009-2016. After EPA and NHTSA
issued their MYs 2012-2016 standards, CARB revised its program such
that compliance with the EPA greenhouse gas standards will be deemed to
be compliance with California's GHG standards.\31\ This facilitates the
National Program by allowing manufacturers to meet all of the standards
with a single national fleet.
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\30\ 74 FR 32744 (July 8, 2009). See also Chamber of Commerce v.
EPA, 642 F.3d 192 (DC Cir. 2011) (dismissing petitions for review
challenging EPA's grant of the waiver).
\31\ See ``California Exhaust Emission Standards and Test
Procedures for 2001 and Subsequent Model Passenger Cars, Light-Duty
Trucks, and Medium-Duty Vehicles as approved by OAL,'' March 29,
2010. Available at http://www.arb.ca.gov/regact/2010/ghgpv10/oaltp.pdf (last accessed August 28, 2011).
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As requested by the President and in the interest of maximizing
regulatory harmonization, NHTSA and EPA have worked closely with CARB
throughout the development of this proposal to develop a common
technical basis. CARB is releasing a proposal for MY 2017-2025 GHG
emissions standards which are consistent with the standards being
proposed by EPA and NHTSA. CARB recognizes the benefit for the country
of continuing the National Program and plans an approach similar to the
one taken for MYs 2012-2016. CARB has committed to propose to revise
its GHG emissions standards for MY 2017 and later such that compliance
with EPA GHG emissions standards shall be deemed compliance with the
California GHG emissions standards, as long as EPA's final GHG
standards are substantially as described in the July 2011 Supplemental
NOI.\32\
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\32\ See State of California July 28, 2011 letter available at:
http://www.epa.gov/otaq/climate/regulations.htm.
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4. Stakeholder Engagement
On July 29, 2010, President Obama announced the support of thirteen
major automakers to pursue the next phase in the Administration's
national vehicle program, increasing fuel economy and reducing GHG
emissions for passenger cars and light trucks built in MYs 2017-
2025.\33\ The President was joined by Ford, GM, Chrysler, BMW, Honda,
Hyundai, Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan, Toyota and
Volvo, which together account for over 90 percent of all vehicles sold
in the United States. The California Air Resources Board (CARB), the
United Auto Workers (UAW) and a number of
[[Page 74864]]
environmental and consumer groups, also announced their support.
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\33\ The President's remarks are available at http://www.whitehouse.gov/the-press-office/2011/07/29/remarks-president-fuel-efficiency-standards; see also http://www.nhtsa.gov/fuel-economy for more information from the agency about the announcement.
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On the same day as the President's announcement, the agencies
released a second SNOI (published in the Federal Register on August 9,
2011) generally describing the joint proposal that the EPA and NHTSA
expected to issue to establish the National Program for model years
2017-2025, and which is set forth in this NPRM. The agencies explained
that the proposal would be developed based on extensive technical
analyses, an examination of the factors required under their respective
statutes and discussions with and input from individual motor vehicle
manufacturers and other stakeholders. The input of stakeholders, which
is encouraged by Executive Order 13563, has been invaluable to the
agencies in developing today's NPRM.
For background, as discussed above, after publishing the
Supplemental NOI on December 8, 2010 (the December 8 SNOI), NHTSA, EPA
and CARB continued studies and conducted more in-depth and
comprehensive rulemaking analyses related to technology cost and
effectiveness, technological feasibility, reasonable timing for
manufacturers to implement technologies, and economic factors, and
other relevant considerations. In addition to this ongoing and more in-
depth work, the agencies continued meeting with stakeholders and
received additional input and feedback to help inform the rulemaking.
Meetings were held with and relevant information was obtained from
manufacturers, manufacturer organizations, suppliers, a labor union,
environmental groups, consumer interest groups, and investment
organizations.
This section summarizes NHTSA and EPA stakeholder engagement
between December 2010 and July 29, 2011, the date on which President
Obama announced the agencies' plans for proposing standards for MY2017-
2025, and the support of thirteen major automakers and other
stakeholders for these plans.\34\ Information that the agencies
presented to stakeholders is posted in the docket and referenced in
multiple places in this section.
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\34\ NHTSA has prepared a list of stakeholder meeting dates and
participants, found in a memorandum to the docket, titled ``2017-
2025 CAFE Stakeholders Meetings List,'' at NHTSA-2010-0131.
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The agencies' engagement with the large and diverse group of
stakeholders described above between December 2010 and July 29, 2011
shared the single aim of ensuring that the agencies possessed the most
complete and comprehensive set of information possible to inform the
proposed rulemaking.
Throughout this period, the stakeholders repeated many of the broad
concerns and suggestions described in the TAR, NOI, and December 8
SNOI. For example, stakeholders uniformly expressed interest in
maintaining a harmonized and coordinated national program that would be
supported by CARB and allow auto makers to build one fleet and preserve
consumer choice. The stakeholders also raised concerns about potential
stringency levels, consumer acceptance of some advanced technologies
and the potential structure of compliance flexibilities available under
EPCA (as amended by EISA) and the CAA. In addition, most of the
stakeholders wanted to discuss issues concerning technology
availability, cost and effectiveness and economic practicability. The
auto manufacturers, in particular, sought to provide the agencies with
a better understanding of their respective strategies (and associated
costs) for improving fuel economy while satisfying consumer demand in
the coming years. Additionally, some stakeholders expressed concern
about potential safety impacts associated with the standards, consumer
costs and consumer acceptance, and potential disparate treatment of
cars and trucks. Some stakeholders also stressed the importance of
investing in infrastructure to support more widespread deployment of
alternative vehicles and fuels. Many stakeholders also asked the
agencies to acknowledge prevailing economic uncertainties in developing
proposed standards. In addition, many stakeholders discussed the number
of years to be covered by the program and what they considered to be
important features of a mid-term review of any standards set or
proposed for MY 2022-2025. In all of these meetings, NHTSA and EPA
sought additional data and information from the stakeholders that would
allow them to refine their initial analyses and determine proposed
standards that are consistent with the agencies' respective statutory
and regulatory requirements. The general issues raised by those
stakeholders are addressed in the sections of this NPRM discussing the
topics to which the issues pertain (e.g., the form of the standards,
technology cost and effectiveness, safety impacts, impact on U.S.
vehicle sales and other economic considerations, costs and benefits).
The first stage of the meetings occurred between December 2010 and
June 20, 2011. These meetings covered topics that were generally
similar to the meetings that were held prior to the publication of the
December 8 Supplemental NOI and that were summarized in the
Supplemental NOI. The manufacturers provided the agencies with
additional information related to their product plans for vehicle
models and fuel efficiency improving technologies and associated cost
estimates. Detailed product plans generally extend only five or six
model years into the future. Manufacturers also provided estimates of
the amount of improvement in CAFE and CO2 emissions they
could reasonably achieve in model MYs 2017-2025; feedback on the shape
of MY 2012-2016 regulatory stringency curves and curve cut points,
regulatory program flexibilities; recommendations for and on the
structure of one or more mid-term reviews of the later model year
standards; estimates of the cost, effectiveness and availability of
some fuel efficiency improving technologies; and feedback on some of
the cost and effectiveness assumptions used in the TAR analysis. In
addition, manufacturers provided input on manufacturer experience with
consumer acceptance of some advanced technologies and raised concerns
over consumer acceptance if higher penetration of these technologies
were needed in the future, consumer's willingness to pay for improved
fuel economy, and ideas on enablers and incentives that would increase
consumer acceptance. Many manufacturers stated that technology is
available to significantly improve fuel economy and CO2
emissions; however, they maintained that the biggest challenges relate
to the cost of the technologies, consumer willingness to pay and
consumer acceptance.
During this first phase NHTSA and EPA continued to meet with other
stakeholders, who provided their own perspectives on issues of
importance to them. They also provided data to the extent available to
them. Information obtained from stakeholders during this phase is
contained in the docket.
The second stage of meetings occurred between June 21, 2011 and
July 14, 2011, during which time EPA, NHTSA, CARB and several White
House Offices kicked-off an intensive series of meetings, primarily
with manufacturers, to share tentative regulatory concepts developed by
EPA, NHTSA and CARB, which included concept stringency curves and
program flexibilities based on the analyses completed by the agencies
as of June 21,\35\ and requested
[[Page 74865]]
feedback.\36\ In particular, the agencies requested that the
manufacturers provide detailed and reliable information on how they
might comply with the concepts and, if they projected they could not
comply, information supporting their belief that they would be unable
to comply. Additionally, EPA and NHTSA sought detailed input from the
manufacturers regarding potential changes to the concept stringency
levels and program flexibilities available under EPA's and NHTSA's
respective authority that might facilitate compliance. In addition,
manufacturers provided input related to consumer acceptance and
adoption of some advanced technologies and program costs based on their
independent assessments or information previously submitted to the
agencies.
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\35\ The agencies consider a range of standards that may satisfy
applicable legal criteria, taking into account the complete record
before them . The initial concepts shared with stakeholders were
within the range the agencies were considering, based on the
information then available to the agencies.
\36\ ``Agency Materials Provided to Manufacturers'' Memo to
docket NHTSA-2010-0131.
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In these second stage meetings, the agencies received considerable
input from the manufacturers. The agencies carefully considered the
manufacturer information along with information from the agencies'
independent analyses. The agencies used all available information to
refine their assessment of the range of program concept stringencies
and provisions that the agencies determined were consistent with their
statutory mandates.
The third stage of meetings occurred between July 15, 2011 and July
28, 2011. During this time period the agencies continued to refine
concept stringencies and compliance flexibilities based on further
consideration of the information available to them. They also met with
approximately 13 manufacturers who expressed ongoing interest in
engaging with the agencies.\37\
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\37\ ``Agency Materials Provided to Manufacturers'' Memo to
docket NHTSA-2010-0131.
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Throughout all three stages, EPA and NHTSA continued to engage
other stakeholders to ensure that the agencies were obtaining the most
comprehensive and reliable information possible to guide the agencies
in developing proposed standards for MY 2017-2025. Many of these
stakeholders reiterated comments previously presented to the agencies.
For instance, environmental organizations consistently stated that
stringent standards are technically achievable and critical to
important national interests, such as improving energy independence,
reducing climate change, and enabling the domestic automobile industry
to remain competitive in the global market. Labor interests stressed
the need to carefully consider economic impacts and the opportunity to
create and support new jobs, and consumer advocates emphasized the
economic and practical benefits to consumers of improved fuel economy
and the need to preserve consumer choice. In addition, a number of
stakeholders stated that the standards under development should not
have an adverse impact on safety.
On July 29, 2011, EPA and NHTSA the agencies issued a new SNOI with
concept stringency curves and program provisions based on refined
analyses and further consideration of the record before the agencies.
The agencies have received letters of support for the concepts laid out
in the SNOI from BMW, Chrysler, Ford, General Motors, Global
Automakers, Honda, Hyundai, Jaguar Land Rover, Kia, Mazda, Mitsubishi,
Nissan, Toyota, Volvo and CARB. Numerous other stakeholders, including
labor, environmental and consumer groups, have expressed their support
for the agencies' plans to move forward.
The agencies have considered all of this stakeholder input in
developing this proposal, and look forward to continuing the productive
dialogue through the comment period following this proposal.
B. Summary of the Proposed 2017-2025 National Program
1. Joint Analytical Approach
This proposed rulemaking continues the collaborative analytical
effort between NHTSA and EPA, which began with the MYs 2012-2016
rulemaking. NHTSA and EPA have worked together, and in close
coordination with CARB, on nearly every aspect of the technical
analysis supporting these joint proposed rules. The results of this
collaboration are reflected in the elements of the respective NHTSA and
EPA proposed rules, as well as in the analytical work contained in the
Draft Joint NHTSA and EPA Technical Support Document (Joint TSD). The
agencies have continued to develop and refine supporting analyses since
issuing the NOI and Interim Joint TAR last September. The Joint TSD, in
particular, describes important details of the analytical work that are
common, as well as highlighting any key differences in approach. The
joint analyses include the build-up of the baseline and reference
fleets, the derivation of the shape of the footprint-based attribute
curves that define the agencies' respective standards, a detailed
description of the estimated costs and effectiveness of the
technologies that are available to vehicle manufacturers, the economic
inputs used to calculate the costs and benefits of the proposed rules,
a description of air conditioner and other off-cycle technologies, and
the agencies' assessment of the effects of the proposed standards on
vehicle safety. This comprehensive joint analytical approach has
provided a sound and consistent technical basis for both agencies in
developing their proposed standards, which are summarized in the
sections below.
2. Level of the Standards
EPA and NHTSA are each proposing two separate sets of standards,
each under its respective statutory authorities. Both the proposed
CO2 and CAFE standards for passenger cars and light trucks
would be footprint-based, similar to the standards currently in effect
through model year 2016, and would become more stringent on average in
each model year from 2017 through 2025. The basis for measuring
performance relative to standards would continue to be based
predominantly on the EPA city and highway test cycles (2-cycle test).
However, EPA is proposing optional air conditioning and off-cycle
credits for the GHG program and adjustments to calculated fuel economy
for the CAFE programs that would be based on test procedures other than
the 2-cycle tests.
EPA is proposing standards that are projected to require, on an
average industry fleet wide basis, 163 grams/mile of CO2 in
model year 2025. This is projected to be achieved through improvements
in fuel efficiency with some additional reductions achieved through
reductions in non-CO2 GHG emissions from reduced AC system
leakage and the use of lower global warming potential (GWP)
refrigerants. The level of 163 grams/mile CO2 would be
equivalent on a mpg basis to 54.5 mpg, if this level was achieved
solely through improvements in fuel efficiency.\38\
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\38\ Real-world CO2 is typically 25 percent higher
and real-world fuel economy is typically 20 percent lower than the
CO2 and CAFE values discussed here. The reference to CO2
here refers to CO2 equivalent reductions, as this
included some degree of reductions in greenhouse gases other than
CO2, as one part of the AC related reductions.
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For passenger cars, the CO2 compliance values associated
with the footprint curves would be reduced on average by 5 percent per
year from the model year 2016 projected passenger car industry-wide
compliance level through model year 2025. In recognition of
manufacturers' unique challenges in improving the fuel economy and GHG
emissions of full-size pickup trucks as we transition from the MY 2016
[[Page 74866]]
standards to MY 2017 and later, while preserving the utility (e.g.,
towing and payload capabilities) of those vehicles, EPA is proposing a
lower annual rate of improvement for light-duty trucks in the early
years of the program. For light-duty trucks, the proposed average
annual rate of CO2 emissions reduction in model years 2017
through 2021 is 3.5 percent per year. EPA is also proposing to change
the slopes of the CO2-footprint curves for light-duty trucks
from those in the 2012-2016 rule, in a manner that effectively means
that the annual rate of improvement for smaller light-duty trucks in
model years 2017 through 2021 would be higher than 3.5 percent, and the
annual rate of improvement for larger light-duty trucks over the same
time period would be lower than 3.5 percent. For model years 2022
through 2025, EPA is proposing an average annual rate of CO2
emissions reduction for light-duty trucks of 5 percent per year.
NHTSA is proposing two phases of passenger car and light truck
standards in this NPRM. The first phase runs from MYs 2017-2021, with
proposed standards that are projected to require, on an average
industry fleet wide basis, 40.9 mpg in MY 2021. For passenger cars, the
annual increase in the stringency of the target curves between model
years 2017 to 2021 is expected to average 4.1 percent. In recognition
of manufacturers' unique challenges in improving the fuel economy and
GHG emissions of full-size pickup trucks as we transition from the MY
2016 standards to MY 2017 and later, while preserving the utility
(e.g., towing and payload capabilities) of those vehicles, NHTSA is
also proposing a slower annual rate of improvement for light trucks in
the first phase of the program. For light trucks, the proposed annual
increase in the stringency of the target curves in model years 2017
through 2021 would be 2.9 percent per year on average. NHTSA is
proposing to change the slopes of the fuel economy footprint curves for
light trucks from those in the MYs 2012-2016 final rule, which would
effectively make the annual rate of improvement for smaller light
trucks in MYs 2017-2021 higher than 2.9 percent, and the annual rate of
improvement for larger light trucks over that time period lower than
2.9 percent.
The second phase of the CAFE program runs from MYs 2022-2025 and
represents conditional \39\ proposed standards that are projected to
require, on an average industry fleet wide basis, 49.6 mpg in model
year 2025. For passenger cars, the annual increase in the stringency of
the target curves between model years 2022 and 2025 is expected to
average 4.3 percent, and for light trucks, the annual increase during
those model years is expected to average 4.7 percent. For the first
time, NHTSA is proposing to increase the stringency of standards by the
amount (in mpg terms) that industry is expected to improve air
conditioning system efficiency, and EPA is proposing, under EPCA, to
allow manufacturers to include air conditioning system efficiency
improvements in the calculation of fuel economy for CAFE compliance.
NHTSA notes that the proposed rates of increase in stringency for CAFE
standards are lower than EPA's proposed rates of increase in stringency
for GHG standards. As in the MYs 2012-2016 rulemaking, this is for
purposes of harmonization and in reflection of several statutory
constraints in EPCA/EISA. As a primary example, NHTSA's proposed
standards, unlike EPA's, do not reflect the inclusion of air
conditioning system refrigerant and leakage improvements, but EPA's
proposed standards would allow consideration of such A/C refrigerant
improvements which reduce GHGs but do not affect fuel economy.
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\39\ By ''conditional,'' NHTSA means to say that the proposed
standards for MYs 2022-2025 represent the agency's current best
estimate of what levels of stringency would be maximum feasible in
those model years, but in order for the standards for those model
years to be legally reviewable a subsequent rulemaking must be
undertaken by the agency at a later time. See Section IV for more
information.
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As with the MYs 2012-2016 standards, NHTSA and EPA's proposed MYs
2017-2025 passenger car and light truck standards are expressed as
mathematical functions depending on vehicle footprint.\40\ Footprint is
one measure of vehicle size, and is determined by multiplying the
vehicle's wheelbase by the vehicle's average track width. The standards
that must be met by each manufacturer's fleet would be determined by
computing the production-weighted average of the targets applicable to
each of the manufacturer's fleet of passenger cars and light
trucks.\41\ Under these footprint-based standards, the average levels
required of individual manufacturers will depend, as noted above, on
the mix and volume of vehicles the manufacturer produces. The values in
the tables below reflect the agencies' projection of the corresponding
average fleet levels that will result from these attribute-based curves
given the agencies' current assumptions about the mix of vehicles that
will be sold in the model years covered by the proposed standards.
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\40\ NHTSA is required to set attribute-based CAFE standards for
passenger cars and light trucks. 49 U.S.C. 32902(b)(3).
\41\ For CAFE calculations, a harmonic average is used.
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As shown in Table I-1, NHTSA's fleet-wide required CAFE levels for
passenger cars under the proposed standards are estimated to increase
from 40.0 to 56.0 mpg between MY 2017 and MY 2025. Fleet-wide required
CAFE levels for light trucks, in turn, are estimated to increase from
29.4 to 40.3 mpg. For the reader's reference, Table I-1 also provides
the estimated average fleet-wide required levels for the combined car
and truck fleets, culminating in an estimated overall fleet average
required CAFE level of 49.6 mpg in MY 2025. Considering these combined
car and truck increases, the proposed standards together represent
approximately a 4.0 percent annual rate of increase,\42\ on average,
relative to the MY 2016 required CAFE levels.
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\42\ This estimated average percentage increase includes the
effect of changes in standard stringency and changes in the forecast
fleet sales mix.
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[[Page 74867]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.001
The estimated average required mpg levels for cars and trucks under
the proposed standards shown in Table I-1 above include the use of A/C
efficiency improvements, as discussed above, but do not reflect a
number of proposed flexibilities and credits that manufacturers could
use for compliance that NHTSA cannot consider in establishing standards
based on EPCA/EISA constraints. These flexibilities would cause the
actual achieved fuel economy to be lower than the required levels in
the table above. The flexibilities and credits that NHTSA cannot
consider include the ability of manufacturers to pay civil penalties
rather than achieving required CAFE levels, the ability to use FFV
credits, the ability to count electric vehicles for compliance, the
operation of plug-in hybrid electric vehicles on electricity for
compliance prior to MY 2020, and the ability to transfer and carry-
forward credits. When accounting for these flexibilities and credits,
NHTSA estimates that the proposed CAFE standards would lead to the
following average achieved fuel economy levels, based on the
projections of what each manufacturer's fleet will comprise in each
year of the program: \43\
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\43\ The proposed CAFE program includes incentives for full size
pick-up trucks that have mild HEV or strong HEV systems, and for
full size pick-up trucks that have fuel economy performance that is
better than the target curve by more than proposed levels. To
receive these incentives, manufacturers must produce vehicles with
these technologies or performance levels at volumes that meet or
exceed proposed penetration levels (percentage of full size pick-up
truck volume). This incentive is described in detail in Section
IV.1. The NHTSA estimates in Table I-2 do not account for the
reduction in estimated average achieved fleet-wide CAFE fuel economy
that would occur if manufacturers use this incentive. NHTSA has
conducted a sensitivity study that estimates the effects for
manufacturers' potential use of this flexibility in Chapter X of the
PRIA.
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[[Page 74868]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.002
NHTSA is also required by EISA to set a minimum fuel economy
standard for domestically manufactured passenger cars in addition to
the attribute-based passenger car standard. The minimum standard
``shall be the greater of (A) 27.5 miles per gallon; or (B) 92 percent
of the average fuel economy projected by the Secretary for the combined
domestic and non-domestic passenger automobile fleets manufactured for
sale in the United States by all manufacturers in the model year * *
*,'' and applies to each manufacturer's fleet of domestically
manufactured passenger cars (i.e., like the other CAFE standards, it
represents a fleet average requirement, not a requirement for each
individual vehicle within the fleet).
Based on NHTSA's current market forecast, the agency's estimates of
these proposed minimum standards for domestic passenger cars for MYs
2017-2025 are presented below in Table I-3.
[GRAPHIC] [TIFF OMITTED] TP01DE11.003
EPA is proposing GHG emissions standards, and Table I-4 provides
estimates of the projected overall fleet-wide CO2 emission
compliance target levels. The values reflected in Table I-4 are those
that correspond to the manufacturers' projected CO2
compliance target levels from the car and truck footprint curves, but
do not account for EPA's projection of how manufactures will implement
two of the proposed incentive programs (advanced technology vehicle
multipliers, and hybrid and performance-based incentives for full-size
pickup trucks). EPA's projection of fleet-wide emissions levels that do
reflect these incentives is shown in Table I-5 below.
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\44\ The projected fleet compliance levels for 2016 are
different for trucks and the fleet than were projected in the 2012-
2016 rule. Our assessment for this proposal is based on a predicted
2016 truck value of 297 and a projected combined car and truck value
of 252 g/mi. That is because the standards are footprint based and
the fleet projections, hence the footprint distributions, change
slightly with each update of our projections, as described below. In
addition, the actual fleet compliance levels for any model year will
not be known until the end of that model year based on actual
vehicle sales.
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[[Page 74869]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.004
As shown in Table I-4, projected fleet-wide CO2 emission
compliance targets for cars increase in stringency from 213 to 144 g/mi
between MY 2017 and MY 2025. Similarly, projected fleet-wide
CO2 equivalent emission compliance targets for trucks
increase in stringency from 295 to 203 g/mi. As shown, the overall
fleet average CO2 level targets are projected to increase in
stringency from 243 g/mi in MY 2017 to 163 g/mi in MY 2025, which is
equivalent to 54.5 mpg if all reductions were made with fuel economy
improvements.
EPA anticipates that manufacturers would take advantage of proposed
program credits and incentives, such as car/truck credit transfers, air
conditioning credits, off-cycle credits, advanced technology vehicle
multipliers, and hybrid and performance-based incentives for full size
pick-up trucks. Two of these flexibility provisions--advanced
technology vehicle multipliers and the full size pick-up hybrid/
performance incentives--are expected to have an impact on the fleet-
wide emissions levels that manufacturers will actually achieve.
Therefore, Table I-5 shows EPA's projection of the achieved emission
levels of the fleet for MY 2017 through 2025. The differences between
the emissions levels shown in Tables I-4 and I-5 reflect the impact on
stringency due to the advanced technology vehicle multipliers and the
full size pick-up hybrid/performance incentives, but do not reflect
car-truck trading, air conditioning credits, or off-cycle credits,
because, while those credit provisions should help reduce
manufacturers' costs of the program, EPA believes that they will result
in real-world emission reductions that will not affect the achieved
level of emission reductions. These estimates are more fully discussed
in III.B
BILLING CODE 4910-59-P
[[Page 74870]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.005
A more detailed description of how the agencies arrived at the year
by year progression of the stringency of the proposed standards can be
found in Sections III and IV of this preamble.
---------------------------------------------------------------------------
\45\ Electric vehicles are assumed at 0 gram/mile in this
analysis.
\46\ The projected fleet compliance levels for 2016 are
different for the fleet than were projected in the 2012-2016 rule.
Our assessment for this proposal is based on a predicted 2016 truck
value of 297 and a projected combined car and truck value of 252 g/
mi. That is because the standards are footprint based and the fleet
projections, hence the footprint distributions, change slightly with
each update of our projections, as described below. In addition, the
actual fleet compliance levels for any model year will not be known
until the end of that model year based on actual vehicle sales.
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Both agencies also considered other alternative standards as part
of their respective Regulatory Impact Analyses that span a reasonable
range of alternative stringencies both more and less stringent than the
standards being proposed. EPA's and NHTSA's analyses of these
regulatory alternatives (and explanation of why we are proposing the
standards proposed and not the regulatory alternatives) are contained
in Sections III and IV of this preamble, respectively, as well as in
EPA's DRIA and NHTSA's PRIA.
3. Form of the Standards
As noted, NHTSA and EPA are proposing to continue attribute-based
standards for passenger cars and light trucks, as required by EISA and
as allowed by the CAA, and continue to use vehicle footprint as the
attribute. Footprint is defined as a vehicle's wheelbase multiplied by
its track width--in other words, the area enclosed by the points at
which the wheels meet the ground. NHTSA and EPA adopted an attribute-
based approach based on vehicle footprint for MYs 2012-2016 light-duty
vehicle standards.\47\ The agencies continue to believe that footprint
is the most appropriate attribute on which to base the proposed
standards, as discussed later in this notice and in Chapter 2 of the
Joint TSD.
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\47\ NHTSA also uses the footprint attribute in its Reformed
CAFE program for light trucks for model years 2008-2011 and
passenger car CAFE standards for MY 2011.
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Under the footprint-based standards, the curve defines a GHG or
fuel economy performance target for each separate car or truck
footprint. Using the curves, each manufacturer thus will have a GHG and
CAFE average standard that is unique to each of its fleets, depending
on the footprints and production volumes of the vehicle models produced
by that manufacturer. A manufacturer will have separate footprint-based
standards for cars and for trucks. The curves are mostly sloped, so
that generally, larger vehicles (i.e., vehicles with larger footprints)
will be subject to less stringent targets (i.e., higher CO2
grams/mile targets and lower CAFE mpg targets) than smaller vehicles.
This is because, generally speaking, smaller vehicles are more capable
of achieving lower levels of CO2 and higher levels of fuel
economy than larger vehicles. Although a manufacturer's fleet average
standards could be estimated throughout the model year based on
projected production volume of its vehicle fleet, the standards to
which the manufacturer must comply will be based on its final model
year production figures. A manufacturer's calculation of its fleet
average standards as well as its fleets' average performance at the end
of the model year will thus be based on the production-weighted average
target and performance of each model in its fleet.\48\
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\48\ As in the MYs 2012-2016 rule, a manufacturer may have some
models that exceed their target, and some that are below their
target. Compliance with a fleet average standard is determined by
comparing the fleet average standard (based on the sales weighted
average of the target levels for each model) with fleet average
performance (based on the sales weighted average of the performance
for each model).
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While the concept is the same, the proposed curve shapes for MYs
2017-2025 are somewhat different from the MYs 2012-2016 footprint
curves. The passenger car curves are similar in shape to the car curves
for MYs 2012-2016. However, the agencies are proposing more significant
changes to the light trucks curves for MYs 2017-2025 compared to the
light truck curves for MYs 2012-2016. The agencies are proposing
changes to the light-truck curve to increase the slope and to
[[Page 74871]]
extend the large-footprint cutpoint over time to larger footprints,
which we believe represent an appropriate balance of both technical and
policy issues, as discussed in Section II.C below and Chapter 2 of the
draft Joint TSD.
NHTSA is proposing the attribute curves below for assigning a fuel
economy target level to an individual car or truck's footprint value,
for model years 2017 through 2025. These mpg values will be production
weighted to determine each manufacturer's fleet average standard for
cars and trucks. Although the general model of the target curve
equation is the same for each vehicle category and each year, the
parameters of the curve equation differ for cars and trucks. Each
parameter also changes on a model year basis, resulting in the yearly
increases in stringency. Figure I-1 below illustrates the passenger car
CAFE standard curves for model years 2017 through 2025 while Figure I-2
below illustrates the light truck CAFE standard curves for model years
2017 through 2025.
EPA is proposing the attribute curves shown in Figure I-3 and
Figure I-4 below for assigning a CO2 target level to an
individual vehicle's footprint value, for model years 2017 through
2025. These CO2 values would be production weighted to
determine each manufacturer's fleet average standard for cars and
trucks. As with the CAFE curves, the general form of the equation is
the same for each vehicle category and each year, but the parameters of
the equation differ for cars and trucks. Again, each parameter also
changes on a model year basis, resulting in the yearly increases in
stringency. Figure I-3 below illustrates the CO2 car
standard curves for model years 2017 through 2025 while Figure I-4
shows the CO2 truck standard curves for model years 2017-
2025.
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[[Page 74872]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.007
[[Page 74873]]
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[[Page 74874]]
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BILLING CODE 4910-59-C
NHTSA and EPA are proposing to use the same vehicle category
definitions for determining which vehicles are subject to the car curve
standards versus the truck curve standards as were used for MYs 2012-
2016 standards. As in the MYs 2012-2016 rulemaking, a vehicle
classified as a car under the NHTSA CAFE program will also be
classified as a car under the EPA GHG program, and likewise for
trucks.\49\ This approach of using CAFE definitions allows the
CO2 standards and the CAFE standards to continue to be
harmonized across all vehicles for the National Program.
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\49\ See 49 CFR 523 for NHTSA's definitions for passenger car
and light truck under the CAFE program.
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As just explained, generally speaking, a smaller footprint vehicle
will tend to have higher fuel economy and lower CO2
emissions relative to a larger footprint vehicle when both have the
same level of fuel efficiency improvement technology. Since the
[[Page 74875]]
proposed standards apply to a manufacturer's overall fleet, not to an
individual vehicle, if a manufacturer's fleet is dominated by small
footprint vehicles, then that fleet will have a higher fuel economy
requirement and a lower CO2 requirement than a manufacturer
whose fleet is dominated by large footprint vehicles. Compared to the
non-attribute based CAFE standards in place prior to MY 2011, the
proposed standards more evenly distribute the compliance burdens of the
standards among different manufacturers, based on their respective
product offerings. With this footprint-based standard approach, EPA and
NHTSA continue to believe that the rules will not create significant
incentives to produce vehicles of particular sizes, and thus there
should be no significant effect on the relative availability of
different vehicle sizes in the fleet due to the proposed standards,
which will help to maintain consumer choice during the rulemaking
timeframe. Consumers should still be able to purchase the size of
vehicle that meets their needs. Table I-6 helps to illustrate the
varying CO2 emissions and fuel economy targets under the
proposed standards that different vehicle sizes will have, although we
emphasize again that these targets are not actual standards--the
proposed standards are manufacturer-specific, rather than vehicle-
specific.
[[Page 74876]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.010
[[Page 74877]]
4. Program Flexibilities for Achieving Compliance
a. CO2/CAFE Credits Generated Based on Fleet Average Over-
Compliance
The MYs 2012-2016 rules contain several provisions which provide
flexibility to manufacturers in meeting standards, many of which the
agencies are not proposing to change for MYs 2017 and later. For
example, the agencies are proposing to continue allowing manufacturers
to generate credits for over-compliance with the CO2 and
CAFE standards.\50\ Under the agencies' footprint-based approach to the
standards, a manufacturer's ultimate compliance obligations are
determined at the end of each model year, when production of the model
year is complete. Since the fleet average standards that apply to a
manufacturer's car and truck fleets are based on the applicable
footprint-based curves, a production volume-weighted fleet average
requirement will be calculated for each averaging set (cars and trucks)
based on the mix and volumes of the models manufactured for sale by the
manufacturer. If a manufacturer's car and/or truck fleet achieves a
fleet average CO2/CAFE level better than the car and/or
truck standards, then the manufacturer generates credits. Conversely,
if the fleet average CO2/CAFE level does not meet the
standard, the fleet would incur debits (also referred to as a
shortfall). As in the MY 2011 CAFE program under EPCA/EISA, and also in
MYs 2012-2016 for the light-duty vehicle GHG and CAFE program, a
manufacturer whose fleet generates credits in a given model year would
have several options for using those credits, including credit carry-
back, credit carry-forward, credit transfers, and credit trading.
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\50\ This credit flexibility is required by EPCA/EISA, see 49
U.S.C. 32903, and allowed by the CAA.
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Credit ``carry-back'' means that manufacturers are able to use
credits to offset a deficit that had accrued in a prior model year,
while credit ``carry-forward'' means that manufacturers can bank
credits and use them toward compliance in future model years. EPCA, as
amended by EISA, requires NHTSA to allow manufacturers to carry-back
credits for up to three model years, and to carry-forward credits for
up to five model years. EPA's MYs 2012-2016 light duty vehicle GHG
program includes the same limitations and EPA is proposing to continue
this limitation in the MY 2017-2025 program. To facilitate the
transition to the increasingly more stringent standards, EPA is
proposing under its CAA authority a one-time CO2 carry-
forward beyond 5 years, such that any credits generated from MY 2010
through 2016 will be able to be used any time through MY 2021. This
provision would not apply to early credits generated in MY 2009.
NHTSA's program will continue the 5-year carry-forward and 3-year
carry-back, as required by statute.
Credit ``transfer'' means the ability of manufacturers to move
credits from their passenger car fleet to their light truck fleet, or
vice versa. EISA required NHTSA to establish by regulation a CAFE
credits transferring program, now codified at 49 CFR part 536, to allow
a manufacturer to transfer credits between its car and truck fleets to
achieve compliance with the standards. For example, credits earned by
over-compliance with a manufacturer's car fleet average standard could
be used to offset debits incurred due to that manufacturer's not
meeting the truck fleet average standard in a given year. However, EISA
imposed a cap on the amount by which a manufacturer could raise its
CAFE through transferred credits: 1 mpg for MYs 2011-2013; 1.5 mpg for
MYs 2014-2017; and 2 mpg for MYs 2018 and beyond.\51\ Under section
202(a) of the CAA, in contrast, there is no statutory limitation on
car-truck credit transfers, and EPA's GHG program allows unlimited
credit transfers across a manufacturer's car-truck fleet to meet the
GHG standard. This is based on the expectation that this flexibility
will facilitate setting appropriate GHG standards that manufacturers'
can comply with in the lead time provided, and will allow the required
GHG emissions reductions to be achieved in the most cost effective way.
Therefore, EPA did not constrain the magnitude of allowable car-truck
credit transfers,\52\ as doing so would reduce the flexibility for lead
time, and would increase costs with no corresponding environmental
benefit. EISA also prohibits the use of transferred credits to meet the
minimum domestic passenger car fleet CAFE standard.\53\ These statutory
limits will necessarily continue to apply to the determination of
compliance with the CAFE standards.
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\51\ 49 U.S.C. 32903(g)(3).
\52\ EPA's proposed program will continue to adjust car and
truck credits by vehicle miles traveled (VMT), as in the MY 2012-
2016 program.
\53\ 49 U.S.C. 32903(g)(4).
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Credit ``trading'' means the ability of manufacturers to sell
credits to, or purchase credits from, one another. EISA allowed NHTSA
to establish by regulation a CAFE credit trading program, also now
codified at 49 CFR Part 536, to allow credits to be traded between
vehicle manufacturers. EPA also allows credit trading in the light-duty
vehicle GHG program. These sorts of exchanges between averaging sets
are typically allowed under EPA's current mobile source emission credit
programs (as well as EPA's and NHTSA's recently promulgated GHG and
fuel efficiency standards for heavy-duty vehicles and engines). EISA
also prohibits manufacturers from using traded credits to meet the
minimum domestic passenger car CAFE standard.\54\
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\54\ 49 U.S.C. 32903(f)(2).
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b. Air Conditioning Improvement Credits/Fuel Economy Value Increases
Air conditioning (A/C) systems contribute to GHG emissions in two
ways. Hydrofluorocarbon (HFC) refrigerants, which are powerful GHGs,
can leak from the A/C system (direct A/C emissions). In addition,
operation of the A/C system places an additional load on the engine
which increases fuel consumption and thus results in additional
CO2 tailpipe emissions (indirect A/C related emissions). In
the MYs 2012-2016 program, EPA allows manufacturers to generate credits
by reducing either or both types of GHG emissions related to A/C
systems. The expected generation of A/C credits is accounted for in
setting the level of the overall CO2 standard. For the
current proposal, as with the MYs 2012-2016 program, manufacturers will
be able to generate CO2-equivalent credits to use in
complying with the CO2 standards for improvements in air
conditioning (A/C) systems, both for efficiency improvements (reduces
tailpipe CO2 and improves fuel consumption) and for leakage
reduction or alternative, lower GWP (global warming potential)
refrigerant use (reduces hydrofluorocarbon (HFC) emissions). EPA is
proposing that the maximum A/C credit available for cars is 18.8 grams/
mile CO2 and for trucks is 24.4 grams/mile CO2.
The proposed test methods used to calculate these direct and indirect
A/C credits are very similar to those of the MYs 2012-2016 program,
though EPA is seeking comment on a revised idle test as well as a new
test procedure.
For the first time in the current proposal, the agencies are
proposing provisions that would account for improvements in air
conditioner efficiency in the CAFE program. Improving A/C efficiency
leads to real-world fuel economy benefits, because as explained above,
A/C operation
[[Page 74878]]
represents an additional load on the engine, so more efficient A/C
operation imposes less of a load and allows the vehicle to go farther
on a gallon of gas. Under EPCA, EPA has authority to adopt procedures
to measure fuel economy and calculate CAFE. Under this authority EPA is
proposing that manufacturers could generate fuel consumption
improvement values for purposes of CAFE compliance based on air
conditioning system efficiency improvements for cars and trucks. This
increase in fuel economy would be allowed up to a maximum based on
0.000563 gallon/mile for cars and 0.000810 gallon/mile for trucks. This
is equivalent to the A/C efficiency CO2 credit allowed by
EPA under the GHG program. The same methods would be used in the CAFE
program to calculate the values for air conditioning efficiency
improvements for cars and trucks as are used in EPA's GHG program.
NHTSA is including in its proposed passenger car and light truck CAFE
standards an increase in stringency in each model year from 2017-2025
by the amount industry is expected to improve air conditioning system
efficiency in those years, in a manner consistent with EPA's GHG
standards. EPA is not proposing to allow generation of fuel consumption
improvement values for CAFE purposes, nor is NHTSA proposing to
increase stringency of the CAFE standard, for the use of A/C systems
that reduce leakage or employ alternative, lower GWP refrigerant,
because those changes do not improve fuel economy.
c. Off-cycle Credits/Fuel Economy Value Increases
For MYs 2012-2016, EPA provided an option for manufacturers to
generate credits for employing new and innovative technologies that
achieve CO2 reductions that are not reflected on current
test procedures. EPA noted in the MYs 2012-2016 rulemaking that
examples of such ``off-cycle'' technologies might include solar panels
on hybrids, adaptive cruise control, and active aerodynamics, among
other technologies. See generally 75 FR at 25438-39. EPA's current
program allows off-cycle credits to be generated through MY 2016.
EPA is proposing that manufacturers may continue to use off-cycle
credits for MY 2017 and later for the GHG program. As with A/C
efficiency, improving efficiency through the use of off-cycle
technologies leads to real-world fuel economy benefits and allows the
vehicle to go farther on a gallon of gas. Thus, under its EPCA
authority EPA is proposing to allow manufacturers to generate fuel
consumption improvement values for purposes of CAFE compliance based on
the use of off-cycle technologies. Increases in fuel economy under the
CAFE program based on off-cycle technology will be equivalent to the
off-cycle credit allowed by EPA under the GHG program, and these
amounts will be determined using the same procedures and test methods
as are used in EPA's GHG program. For the reasons discussed in sections
III and IV of this proposal, the ability to generate off-cycle credits
and increases in fuel economy for use in compliance will not affect or
change the level of the GHG or CAFE standards proposed by each agency.
Many automakers indicated that they had a strong interest in
pursuing off-cycle technologies, and encouraged the agencies to refine
and simplify the evaluation process to provide more certainty as to the
types of technologies the agencies would approve for credit generation.
For 2017 and later, EPA is proposing to expand and streamline the MYs
2012-2016 off-cycle credit provisions, including an approach by which
the agencies would provide specified amounts of credit and fuel
consumption improvement values for a subset of off-cycle technologies
whose benefits are readily quantifiable. EPA is proposing a list of
technologies and credit values, where sufficient data is available,
that manufacturers could use without going through an advance approval
process that would otherwise be required to generate credits. EPA
believes that our assessment of off-cycle technologies and associated
credit values on this proposed list is conservative, and automakers may
apply for additional off-cycle credits beyond the minimum credit value
if they have sufficient supporting data. Further, manufacturers may
also apply for off-cycle technologies beyond those listed, again, if
they have sufficient data.
In addition, EPA is providing additional detail on the process and
timing for the credit/fuel consumption improvement values application
and approval process. EPA is proposing a timeline for the approval
process, including a 60-day EPA decision process from the time a
manufacturer submits a complete application. EPA is also proposing a
detailed, common, step-by-step process, including a specification of
the data that manufacturers must submit. For off-cycle technologies
that are both not covered by the pre-approved off-cycle credit/fuel
consumption improvement values list and that are not quantifiable based
on the 5-cycle test cycle option provided in the 2012-2016 rulemaking,
EPA is proposing to retain the public comment process from the MYs
2012-2016 rule.
d. Incentives for Electric Vehicles, Plug-in Hybrid Electric Vehicles,
and Fuel Cell Vehicles
To facilitate market penetration of the most advanced vehicle
technologies as rapidly as possible, EPA is proposing an incentive
multiplier for compliance purposes for all electric vehicles (EVs),
plug-in hybrid electric vehicles (PHEVs), and fuel cell vehicles (FCVs)
sold in MYs 2017 through 2021. This multiplier approach means that each
EV/PHEV/FCV would count as more than one vehicle in the manufacturer's
compliance calculation. EPA is proposing that EVs and FCVs start with a
multiplier value of 2.0 in MY 2017, phasing down to a value of 1.5 in
MY 2021. PHEVs would start at a multiplier value of 1.6 in MY 2017 and
phase down to a value of 1.3 in MY 2021.\55\ The multiplier would be
1.0 for MYs 2022-2025.
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\55\ The multipliers for EV/FCV would be: 2017-2019--2.0, 2020--
1.75, 2021--1.5; for PHEV: 2017-2019--1.6, 2020--1.45, 2021--1.3.
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NHTSA currently interprets EPCA and EISA as precluding the agency
from offering additional incentives for EVs, FCVs and PHEVs, except as
specified by statute,\56\ and thus is not proposing incentive
multipliers comparable to the EPA incentive multipliers described
above.
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\56\ Because 49 U.S.C. 32904(a)(2)(B) expressly requires EPA to
calculate the fuel economy of electric vehicles using the Petroleum
Equivalency Factor developed by DOE, which contains an incentive for
electric operation already, and because 49 U.S.C. 32905(a) expressly
requires EPA to calculate the fuel economy of FCVs using a specified
incentive, NHTSA believes that Congress' having provided clear
incentives for these technologies in the CAFE program suggests that
additional incentives beyond those would not be consistent with
Congress' intent. Similarly, because the fuel economy of PHEVs'
electric operation must also be calculated using DOE's PEF, the
incentive for electric operation appears to already be inherent in
the statutory structure.
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For EVs, PHEVs and FCVs, EPA is proposing to set a value of 0 g/
mile for the tailpipe compliance value for EVs, PHEVs (electricity
usage) and FCVs for MY 2017-2021, with no limit on the quantity of
vehicles eligible for 0 g/mi tailpipe emissions accounting. For MY
2022-2025, EPA is proposing that 0 g/mi only be allowed up to a per-
company cumulative sales cap, tiered as follows: 1) 600,000 vehicles
for companies that sell 300,000 EV/PHEV/FCVs in MYs 2019-2021; 2)
200,000 vehicles for all other manufacturers. EPA believes the
industry-wide impact of such a tiered cap will be approximately 2
million vehicles. EPA
[[Page 74879]]
proposes to phase-in the change in compliance value, from 0 grams per
mile to net upstream accounting, for any manufacturer that exceeds its
cumulative production cap for EV/PHEV/FCVs. EPA proposes that, starting
with MY 2022, the compliance value for EVs, FCVs, and the electric
portion of PHEVs in excess of individual automaker cumulative
production caps would be based on net upstream accounting.
For EVs and other dedicated alternative fuel vehicles, EPA is
proposing to calculate fuel economy for the CAFE program using the same
methodology as in the MYs 2012-2016 rulemaking, which aligns with EPCA/
EISA statutory requirements. For liquid alternative fuels, this
methodology generally counts 15 percent of the volume of fuel used in
determine the mpg-equivalent fuel economy. For gaseous alternative
fuels, the methodology generally determines a gasoline equivalent mpg
based on the energy content of the gaseous fuel consumed, and then
adjusts the fuel consumption by effectively only counting 15 percent of
the actual energy consumed. For electricity, the methodology generally
determines a gasoline equivalent mpg by measuring the electrical energy
consumed, and then using a petroleum equivalency factor (PEF) to
convert to an mpg-equivalent value. The PEF for electricity includes an
adjustment that effectively only counts 15 percent of the actual energy
consumed. Counting 15 percent of the volume or energy provides an
incentive for alternative fuels in the CAFE program.
The methodology that EPA is proposing for dual fueled vehicles
under the GHG program and to calculate fuel economy for the CAFE
program is discussed below in subsection I.B.7.a.
e. Incentives for ``Game Changing'' Technologies Performance for Full-
Size Pickup Truck Including Hybridization
The agencies recognize that the standards under consideration for
MYs 2017-2025 will be challenging for large trucks, including full size
pickup trucks. In order to incentivize the penetration into the
marketplace of ``game changing'' technologies for these pickups,
including their hybridization, EPA is proposing a CO2 credit
in the GHG program and an equivalent fuel consumption improvement value
in the CAFE program for manufacturers that employ significant
quantities of hybridization on full size pickup trucks, by including a
per-vehicle CO2 credit and fuel consumption improvement
value available for mild and strong hybrid electric vehicles (HEVs).
EPA would provide the incentive for the GHG program under EPA's CAA
authority and the incentive for the CAFE program under EPA's EPCA
authority. EPA's GHG and NHTSA's CAFE proposed standards are set at
levels that take into account this flexibility as an incentive for the
introduction of advanced technology. This provides the opportunity to
begin to transform the most challenging category of vehicles in terms
of the penetration of advanced technologies, which, if successful at
incentivizing these ``game changing technologies,'' should allow
additional opportunities to successfully achieve the higher levels of
truck stringencies in MYs 2022-2025.
EPA is proposing that access to this credit and fuel consumption
improvement value be conditioned on a minimum penetration of the
technology in a manufacturer's full size pickup truck fleet, and is
proposing criteria for a full size pickup truck (e.g., minimum bed size
and minimum towing or payload capability). EPA is proposing that mild
HEV pickup trucks would be eligible for a per vehicle credit of 10 g/mi
\57\ during MYs 2017-2021 if the technology is used on a minimum
percentage of a company's full size pickups, beginning with at least
30% of a company's full size pickup production in 2017 and ramping up
to at least 80% in MY 2021. Strong HEV pickup trucks would be eligible
for a 20 g/mi per \58\ vehicle credit during MYs 2017-2025 if the
technology is used on at least 10% of the company's full size pickups.
These volume thresholds are being proposed in order to encourage rapid
penetration of these technologies in this vehicle segment. EPA and
NHTSA are proposing specific definitions of mild and strong HEV pickup
trucks.
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\57\ 0.001125 gallon/mile.
\58\ 0.00225 gallon/mile.
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Because there are other technologies besides mild and strong
hybrids which can significantly reduce GHG emissions and fuel
consumption in pickup trucks, EPA is also proposing a performance-based
incentive CO2 emissions credit and equivalent fuel
consumption improvement value for full size pickup trucks that achieve
a significant CO2 reduction below/fuel economy improvement
above the applicable target. This would be available for vehicles
achieving significant CO2 reductions/fuel economy
improvements through the use of technologies other than hybrid drive
systems. EPA is proposing that eligible pickup trucks achieving 15
percent below their applicable CO2 target would receive a 10
g/mi credit, and those achieving 20 percent below their target would
receive a 20 g/mi credit. The 10 g/mi performance-based credit would be
available for MYs 2017 to 2021 and a vehicle meeting the requirements
would receive the credit until MY 2021 unless its CO2 level
increases. The 20 g/mi performance-based credit would be available for
a maximum of 5 years within the model years of 2017 to 2025, provided
the CO2 level does not increase for those vehicles earning
the credit. The credits would begin in the model year of the eligible
vehicle's introduction, and could not extend past MY 2021 for the 10 g/
mi credit and MY 2025 for the 20 g/mi credit.
To avoid double-counting, the same vehicle would not receive credit
under both the HEV and the performance based approaches.
5. Mid-Term Evaluation
Given the long time frame at issue in setting standards for MYs
2022-2025, and given NHTSA's obligation to conduct a separate
rulemaking in order to establish final standards for vehicles for those
model years, EPA and NHTSA are proposing a comprehensive mid-term
evaluation and agency decision-making process. As part of this
undertaking, both NHTSA and EPA will develop and compile up-to-date
information for the evaluation, through a collaborative, robust and
transparent process, including public notice and comment. The
evaluation will be based on (1) a holistic assessment of all of the
factors considered by the agencies in setting standards, including
those set forth in the rule and other relevant factors, and (2) the
expected impact of those factors on the manufacturers' ability to
comply, without placing decisive weight on any particular factor or
projection. The comprehensive evaluation process will lead to final
agency action by both agencies.
Consistent with the agencies' commitment to maintaining a single
national framework for regulation of vehicle emissions and fuel
economy, the agencies fully expect to conduct the mid-term evaluation
in close coordination with the California Air Resources Board (CARB).
Moreover, the agencies fully expect that any adjustments to the GHG
standards will be made with the participation of CARB and in a manner
that ensures continued harmonization of state and federal vehicle
standards.
Further discussion of the mid-term evaluation can be found in
section III and IV of the proposal.
[[Page 74880]]
6. Coordinated Compliance
The MYs 2012-2016 final rules established detailed and
comprehensive regulatory provisions for compliance and enforcement
under the GHG and CAFE programs. These provisions remain in place for
model years beyond MY 2016 without additional action by the agencies
and EPA and NHTSA are not proposing any significant modifications to
them. In the MYs 2012-2016 final rule, NHTSA and EPA established a
program that recognizes, and replicates as closely as possible, the
compliance protocols associated with the existing CAA Tier 2 vehicle
emission standards, and with earlier model year CAFE standards. The
certification, testing, reporting, and associated compliance activities
established for the GHG program closely track those in previously
existing programs and are thus familiar to manufacturers. EPA already
oversees testing, collects and processes test data, and performs
calculations to determine compliance with both CAFE and CAA standards.
Under this coordinated approach, the compliance mechanisms for both
programs are consistent and non-duplicative. EPA also applies the CAA
authorities applicable to its separate in-use requirements in this
program.
The compliance approach allows manufacturers to satisfy the GHG
program requirements in the same general way they comply with
previously existing applicable CAA and CAFE requirements. Manufacturers
will demonstrate compliance on a fleet-average basis at the end of each
model year, allowing model-level testing to continue throughout the
year as is the current practice for CAFE determinations. The compliance
program design includes a single set of manufacturer reporting
requirements and relies on a single set of underlying data. This
approach still allows each agency to assess compliance with its
respective program under its respective statutory authority. The
program also addresses EPA enforcement in cases of noncompliance.
7. Additional Program Elements
a. Treatment of Compressed Natural Gas (CNG), Plug-in Hybrid Electric
Vehicles (PHEVs), and Flexible Fuel Vehicles (FFVs)
EPA is proposing that CO2 compliance values for plug-in
hybrid electric vehicles (PHEVs) and bi-fuel compressed natural gas
(CNG) vehicles will be based on estimated use of the alternative fuels,
recognizing that, once a consumer has paid several thousand dollars to
be able to use a fuel that is considerably cheaper than gasoline, it is
very likely that the consumer will seek to use the cheaper fuel as much
as possible. Accordingly, for CO2 emissions compliance, EPA
is proposing to use the Society of Automotive Engineers ``utility
factor'' methodology (based on vehicle range on the alternative fuel
and typical daily travel mileage) to determine the assumed percentage
of operation on gasoline and percentage of operation on the alternative
fuel for both PHEVs and bi-fuel CNG vehicles, along with the
CO2 emissions test values on the alternative fuel and
gasoline.
EPA is proposing to account for E85 use by flexible fueled vehicles
(FFVs) as in the existing MY 2016 and later program, based on actual
usage of E85 which represents a real-world reduction attributed to
alternative fuels. Unlike PHEV and bi-fuel CNG vehicles, there is not a
significant cost differential between an FFV and a conventional
gasoline vehicle and historically consumers have only fueled these
vehicles with E85 a very small percentage of the time.
In the CAFE program for MYs 2017-2019, the fuel economy of dual
fuel vehicles will be determined in the same manner as specified in the
MY 2012-2016 rule, and as defined by EISA. Beginning in MY 2020, EISA
does not specify how to measure the fuel economy of dual fuel vehicles,
and EPA is proposing under its EPCA authority to use the ``utility
factor'' methodology for PHEV and CNG vehicles described above to
determine how to proportion the fuel economy when operating on gasoline
or diesel fuel and the fuel economy when operating on the alternative
fuel. For FFVs, EPA is proposing to use the same methodology as it uses
for the GHG program to determine how to proportion the fuel economy,
which would be based on actual usage of E85. EPA is proposing to
continue to use Petroleum Equivalency Factors and the 0.15 divisor used
in the MY 2012-2016 rule for the alternative fuels, however with no cap
on the amount of fuel economy increase allowed. This issue is discussed
further in Section III.B.10.
b. Exclusion of Emergency and Police Vehicles
Under EPCA, manufacturers are allowed to exclude emergency vehicles
from their CAFE fleet \59\ and all manufacturers have historically done
so. In the MYs 2012-2016 program, EPA's GHG program applies to these
vehicles. However, after further consideration of this issue, EPA is
proposing the same type of exclusion provision for these vehicles for
MY 2012 and later because of the unique features of vehicles designed
specifically for law enforcement and emergency purposes, which have the
effect of raising their GHG emissions and calling into question the
ability of manufacturers to sufficiently reduce the emissions from
these vehicles without compromising necessary vehicle features or
dropping vehicles from their fleets.
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\59\ 49 U.S.C. 32902(e).
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c. Small Businesses and Small Volume Manufacturers
EPA is proposing provisions to address two categories of smaller
manufacturers. The first category is small businesses as defined by the
Small Business Administration (SBA). For vehicle manufacturers, SBA's
definition of small business is any firm with less than 1,000
employees. As with the MYs 2012-2016 program, EPA is proposing to
continue to exempt small businesses from the GHG standards, for any
company that meets the SBA's definition of a small business. EPA
believes this exemption is appropriate given the unique challenges
small businesses would face in meeting the GHG standards, and since
these businesses make up less than 0.1% of total U.S. vehicle sales,
and there is no significant impact on emission reductions.
EPA's proposal also addresses small volume manufacturers, with U.S.
annual sales of less than 5,000 vehicles. Under the MYs 2012-2016
program, these small volume manufacturers are eligible for an exemption
from the CO2 standards. EPA is proposing to bring small
volume manufacturers into the CO2 program for the first time
starting in MY 2017, and allow them to petition EPA for alternative
standards.
EPCA provides NHTSA with the authority to exempt from the generally
applicable CAFE standards manufacturers that produce fewer than 10,000
passenger cars worldwide in the model year each of the two years prior
to the year in which they seek an exemption.\60\ If NHTSA exempts a
manufacturer, it must establish an alternate standard for that
manufacturer for that model year, at the level that the agency decides
is maximum feasible for that manufacturer. The exemption and
alternative standard apply only if the exempted manufacturer also
produces fewer than 10,000 passenger cars
[[Page 74881]]
worldwide in the year for which the exemption was granted.
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\60\ 49 U.S.C. 32902(d). Implementing regulations may be found
in 49 CFR part 525.
---------------------------------------------------------------------------
Further, the Temporary Lead-time Allowance Alternative Standards
(TLAAS) provisions included in EPA's MYs 2012-2016 program for
manufacturers with MY 2009 U.S. sales of less than 400,000 vehicles
ends after MY 2015 for most eligible manufacturers.\61\ EPA is not
proposing to extend or otherwise replace the TLAAS provisions for the
proposed MYs 2017-2025 program. However, EPA is inviting comment on
whether this or some other form of flexibility is warranted for lower
volume, limited line manufacturers, as further discussed in Section
III.B.8. With the exception of the small businesses and small volume
manufacturers discussed above, the proposed MYs 2017-2025 standards
would apply to all manufacturers.
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\61\ TLAAS ends after MY 2016 for manufacturers with MY 2009
U.S. sales of less than 50,000 vehicles.
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C. Summary of Costs and Benefits for the Proposed National Program
This section summarizes the projected costs and benefits of the
proposed CAFE and GHG emissions standards. These projections helped
inform the agencies' choices among the alternatives considered and
provide further confirmation that the proposed standards are
appropriate under their respective statutory authorities. The costs and
benefits projected by NHTSA to result from these CAFE standards are
presented first, followed by those from EPA's analysis of the GHG
emissions standards. The agencies recognize that there are
uncertainties regarding the benefit and cost values presented in this
proposal. Some benefits and costs are not quantified. The value of
other benefits and costs could be too low or too high.
For several reasons, the estimates for costs and benefits presented
by NHTSA and EPA, while consistent, are not directly comparable, and
thus should not be expected to be identical. Most important, NHTSA and
EPA's standards would require slightly different fuel efficiency
improvements. EPA's proposed GHG standard is more stringent in part due
to its assumptions about manufacturers' use of air conditioning leakage
credits, which result from reductions in air conditioning-related
emissions of HFCs. NHTSA is proposing standards at levels of stringency
that assume improvements in the efficiency of air conditioning systems,
but that do not account for reductions in HFCs, which are not related
to fuel economy or energy conservation. In addition, the CAFE and GHG
standards offer somewhat different program flexibilities and
provisions, and the agencies' analyses differ in their accounting for
these flexibilities (examples include the treatment of EVs, dual-fueled
vehicles, and civil penalties), primarily because NHTSA is statutorily
prohibited from considering some flexibilities when establishing CAFE
standards,\62\ while EPA is not. These differences contribute to
differences in the agencies' respective estimates of costs and benefits
resulting from the new standards. Nevertheless, it is important to note
that NHTSA and EPA have harmonized the programs as much as possible,
and this proposal to continue the National Program would result in
significant cost and other advantages for the automobile industry by
allowing them to manufacture one fleet of vehicles across the U.S.,
rather than comply with potentially multiple state standards that may
occur in the absence of the National Program.
---------------------------------------------------------------------------
\62\ See 49 U.S.C. 32902(h).
---------------------------------------------------------------------------
In summary, the projected costs and benefits presented by NHTSA and
EPA are not directly comparable, because the levels being proposed by
EPA include air conditioning-related improvements in HFC reductions,
and because of the projection by EPA of complete compliance with the
proposed GHG standards, whereas NHTSA projects some manufacturers will
pay civil penalties as part of their compliance strategy, as allowed by
EPCA. It should also be expected that overall EPA's estimates of GHG
reductions and fuel savings achieved by the proposed GHG standards will
be slightly higher than those projected by NHTSA only for the CAFE
standards because of the same reasons described above. For the same
reasons, EPA's estimates of manufacturers' costs for complying with the
proposed passenger car and light truck GHG standards are slightly
higher than NHTSA's estimates for complying with the proposed CAFE
standards.
1. Summary of Costs and Benefits for the Proposed NHTSA CAFE Standards
In reading the following section, we note that tables are
identified as reflecting ``estimated required'' values and ``estimated
achieved'' values. When establishing standards, EPCA allows NHTSA to
only consider the fuel economy of dual-fuel vehicles (for example, FFVs
and PHEVs) when operating on gasoline, and prohibits NHTSA from
considering the use of dedicated alternative fuel vehicle credits
(including for example EVs), credit carry-forward and carry-back, and
credit transfer and trading. NHTSA's primary analysis of costs, fuel
savings, and related benefits from imposing higher CAFE standards does
not include them. However, EPCA does not prohibit NHTSA from
considering the fact that manufacturers may pay civil penalties rather
than comply with CAFE standards, and NHTSA's primary analysis accounts
for some manufacturers' tendency to do so. The primary analysis is
generally identified in tables throughout this document by the term
``estimated required CAFE levels.''
To illustrate the effects of the flexibilities and technologies
that NHTSA is prohibited from including in its primary analysis, NHTSA
performed a supplemental analysis of these effects on benefits and
costs of the proposed CAFE standards that helps to demonstrate the
real-world impacts. As an example of one of the effects, including the
use of FFV credits reduces estimated per-vehicle compliance costs of
the program, but does not significantly change the projected fuel
savings and CO2 reductions, because FFV credits reduce the
fuel economy levels that manufacturers achieve not only under the
proposed standards, but also under the baseline MY 2016 CAFE standards.
As another example, including the operation of PHEV vehicles on both
electricity and gasoline, and the expected use of EVs for compliance
may raise the fuel economy levels that manufacturers achieve under the
proposed standards. The supplemental analysis is generally identified
in tables throughout this document by the term ``estimated achieved
CAFE levels.''
Thus, NHTSA's primary analysis shows the estimates the agency
considered for purposes of establishing new CAFE standards, and its
supplemental analysis including manufacturer use of flexibilities and
advanced technologies currently reflects the agency's best estimate of
the potential real-world effects of the proposed CAFE standards.
Without accounting for the compliance flexibilities and advanced
technologies that NHTSA is prohibited from considering when determining
the maximum feasible level of new CAFE standards, since manufacturers'
decisions to use those flexibilities and technologies are voluntary,
NHTSA estimates that the required fuel economy increases would lead to
fuel savings totaling 173 billion gallons throughout the lives of
vehicles sold in MYs 2017-2025. At a 3 percent discount rate, the
present value of the economic benefits resulting from those fuel
[[Page 74882]]
savings is $451 billion; at a 7 percent private discount rate, the
present value of the economic benefits resulting from those fuel
savings is $358 billion.
The agency further estimates that these new CAFE standards would
lead to corresponding reductions in CO2 emissions totaling
1.8 billion metric tons during the lives of vehicles sold in MYs 2017-
2025. The present value of the economic benefits from avoiding those
emissions is $49 billion, based on a global social cost of carbon value
of $22 per metric ton (in 2010, and growing thereafter).\63\ It is
important to note that NHTSA's CAFE standards and EPA's GHG standards
will both be in effect, and each will lead to increases in average fuel
economy and CO2 reductions. The two agencies standards
together comprise the National Program, and this discussion of the
costs and benefits of NHTSA's CAFE standards does not change the fact
that both the CAFE and GHG standards, jointly, are the source of the
benefits and costs of the National Program. All costs are in 2009
dollars.
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\63\ NHTSA also estimated the benefits associated with three
more estimates of a one ton GHG reduction in 2009 ($5, $36, and
$67), which will likewise grow thereafter. See Section II for a more
detailed discussion of the social cost of carbon.
\64\ The ``Earlier'' column shows benefits that NHTSA forecasts
manufacturers will implement in model years prior to 2017 that are
in response to the proposed MY 2017-2025 standards. The CAFE model
forecasts that manufactures will implement some technologies, and
achieve benefits during vehicle redesigns that occur prior to MY
2017 in order to comply with MY 2017 and later standards in a cost
effective manner.
[GRAPHIC] [TIFF OMITTED] TP01DE11.011
[[Page 74883]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.012
Considering manufacturers' ability to employ compliance
flexibilities and advanced technologies for meeting the standards,
NHTSA estimates the following for fuel savings and avoided
CO2 emissions, assuming FFV credits
[[Page 74884]]
would be used toward both the baseline and final standards:
[GRAPHIC] [TIFF OMITTED] TP01DE11.013
[[Page 74885]]
NHTSA estimates that the fuel economy increases resulting from the
proposed standards would produce other benefits both to drivers (e.g.,
reduced time spent refueling) and to the U.S. as a whole (e.g.,
reductions in the costs of petroleum imports beyond the direct savings
from reduced oil purchases),\65\ as well as some disbenefits (e.g.,
increased traffic congestion) caused by drivers' tendency to travel
more when the cost of driving declines (as it does when fuel economy
increases). NHTSA has estimated the total monetary value to society of
these benefits and disbenefits, and estimates that the proposed
standards will produce significant net benefits to society. Using a 3
percent discount rate, NHTSA estimates that the present value of these
benefits would total more than $515 billion over the lives of the
vehicles sold during MYs 2017-2025; using a 7 percent discount rate,
more than $419 billion. More discussion regarding monetized benefits
can be found in Section IV of this notice and in NHTSA's PRIA. Note
that the benefit calculation in the following tables includes the
benefits of reducing CO2 emissions,\66\ but not the benefits
of reducing other GHG emissions.
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\65\ We note, of course, that reducing the amount of fuel
purchased also reduces tax revenue for the Federal and state/local
governments. NHTSA discusses this issue in more detail in Chapter
VIII of the PRIA.
\66\ CO2 benefits for purposes of these tables are
calculated using the $22/ton SCC values. Note that the net present
value of reduced GHG emissions is calculated differently from other
benefits. The same discount rate used to discount the value of
damages from future emissions (SCC at 5, 3, and 2.5 percent) is used
to calculate net present value of SCC for internal consistency.
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[[Page 74886]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.014
Considering manufacturers' ability to employ compliance
flexibilities and advanced technologies for meeting the standards,
NHTSA estimates the present value of these benefits would be reduced as
follows:
[[Page 74887]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.015
NHTSA attributes most of these benefits (about $451 billion at a 3
percent discount rate, or about $358 billion at a 7 percent discount
rate, excluding consideration of compliance flexibilities and advanced
technologies for meeting the standards) to reductions in fuel
consumption, valuing fuel (for societal purposes) at the future pre-tax
prices projected in the Energy Information Administration's (EIA)
reference case forecast from the Annual Energy Outlook (AEO) 2011.
NHTSA's PRIA accompanying this proposal
[[Page 74888]]
presents a detailed analysis of specific benefits of the rule.
[GRAPHIC] [TIFF OMITTED] TP01DE11.016
NHTSA estimates that the increases in technology application
necessary to achieve the projected improvements in fuel economy will
entail considerable monetary outlays. The agency estimates that the
incremental costs for achieving the proposed CAFE standards--that is,
outlays by vehicle manufacturers over and above those required to
comply with the MY 2016 CAFE standards--will total about $157 billion
(i.e., during MYs 2017-2025).
[GRAPHIC] [TIFF OMITTED] TP01DE11.017
However, NHTSA estimates that manufacturers employing compliance
flexibilities and advanced technologies to meet the standards could
significantly reduce these outlays:
[GRAPHIC] [TIFF OMITTED] TP01DE11.018
[[Page 74889]]
NHTSA projects that manufacturers will recover most or all of these
additional costs through higher selling prices for new cars and light
trucks. To allow manufacturers to recover these increased outlays (and,
to a much less extent, the civil penalties that some manufacturers are
expected to pay for non-compliance), the agency estimates that the
standards would lead to increase in average new vehicle prices ranging
from $161 per vehicle in MY 2017 to $1876 per vehicle in MY 2025:
[GRAPHIC] [TIFF OMITTED] TP01DE11.019
And as before, NHTSA estimates that manufacturers employing
compliance flexibilities and advanced technologies to meet the
standards could significantly reduce these increases.
[GRAPHIC] [TIFF OMITTED] TP01DE11.020
NHTSA estimates, therefore, that the total benefits of these
proposed CAFE standards will be more than 2.5 times the magnitude of
the corresponding costs. As a consequence, the proposed CAFE standards
would produce net benefits of $358 billion at a 3 percent discount rate
(with compliance flexibilities, $355 billion), or $262 billion at a 7
percent discount rate (with compliance flexibilities, $264 billion),
over the useful lives of the vehicles sold during MYs 2017-2025.
2. Summary of Costs and Benefits for the Proposed EPA GHG Standards
EPA has analyzed in detail the costs and benefits of the proposed
GHG standards. Table I-17 shows EPA's estimated lifetime discounted
cost, fuel savings, and benefits for all vehicles projected to be sold
in model years 2017-2025. The benefits include impacts such as climate-
related economic benefits from reducing emissions of CO2
(but not other GHGs), reductions in energy security externalities
caused by U.S. petroleum consumption and imports, the value of certain
health benefits, the value of additional driving attributed to the
rebound effect, the value of reduced refueling time needed to fill up a
more
[[Page 74890]]
fuel efficient vehicle. The analysis also includes economic impacts
stemming from additional vehicle use, such as the economic damages
caused by accidents, congestion and noise. Note that benefits depend on
estimated values for the social cost of carbon (SCC), as described in
Section III.H.
BLLING CODE 4910-59-P
[GRAPHIC] [TIFF OMITTED] TP01DE11.021
[[Page 74891]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.022
BLLING CODE 4910-59-C
Table I-18 shows EPA's estimated lifetime fuel savings and
CO2 equivalent emission reductions for all vehicles sold in
the model years 2017-2025. The values in Table I-18 are projected
lifetime totals for each model year and are not discounted. As
documented in EPA's draft RIA, the potential credit transfer between
cars and trucks may change the distribution of the fuel savings and GHG
emission impacts between cars and trucks. As discussed above with
respect to NHTSA's CAFE standards, it is important to note that NHTSA's
CAFE standards and EPA's GHG standards will both be in effect, and each
will lead to increases in average fuel economy and reductions in
CO2 emissions. The two agencies' standards together comprise
the National Program, and this discussion of costs and benefits of
EPA's proposed GHG standards does not change the fact that both the
proposed CAFE and GHG standards, jointly, are the source of the
benefits and costs of the National Program. In general though, in
addition to the added GHG benefit of HFC reductions from the EPA
program, the fuel savings benefit are also somewhat higher than that
from CAFE, primarily because of the possibility of paying civil
penalties in lieu of applying technology in NHTSA's program, which is
required by EPCA.
BILLING CODE 4910-59-P
[[Page 74892]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.023
BILLING CODE 4910-59-C
Table I-19 shows EPA's estimated lifetime discounted benefits for
all vehicles sold in model years 2017-2025. Although EPA estimated the
benefits
[[Page 74893]]
associated with four different values of a one ton GHG reduction ($5,
$22 $36, $67 in CY 2010 and in 2009 dollars), for the purposes of this
overview presentation of estimated benefits EPA is showing the benefits
associated with one of these marginal values, $22 per ton of
CO2, in 2009 dollars and 2010 emissions. Table I-19 presents
benefits based on the $22 value. Section III.H presents the four
marginal values used to estimate monetized benefits of GHG reductions
and Section III.H presents the program benefits using each of the four
marginal values, which represent only a partial accounting of total
benefits due to omitted climate change impacts and other factors that
are not readily monetized. The values in the table are discounted
values for each model year of vehicles throughout their projected
lifetimes. The benefits include all benefits considered by EPA such as
GHG reductions, PM benefits, energy security and other externalities
such as reduced refueling time and accidents, congestion and noise. The
lifetime discounted benefits are shown for one of four different social
cost of carbon (SCC) values considered by EPA. The values in Table I-19
do not include costs associated with new technology required to meet
the GHG standard and they do not include the fuel savings expected from
that technology.
[[Page 74894]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.024
Table I-20 shows EPA's estimated lifetime fuel savings, lifetime
CO2 emission reductions, and the monetized net present
values of those fuel savings and CO2 emission reductions.
The fuel savings and CO2 emission reductions are projected
lifetime values for all vehicles sold in the model years 2017-2025. The
estimated fuel savings in billions of gallons and the GHG reductions in
million metric tons of CO2 shown in Table I-20 are totals
for the nine model years throughout their projected lifetime and are
not discounted. The monetized values shown in Table I-20 are the summed
values of the discounted monetized fuel savings and monetized
CO2 reductions for the model years 2017-2025 vehicles
throughout their lifetimes. The monetized values in Table I-20 reflect
[[Page 74895]]
both a 3 percent and a 7 percent discount rate as noted.
BILLING CODE 4910-59-P
[GRAPHIC] [TIFF OMITTED] TP01DE11.025
BILLING CODE 4910-59-C
Table I-21 shows EPA's estimated incremental and total technology
outlays for cars and trucks for each of the model years 2017-2025. The
technology outlays shown in Table I-21 are for the industry as a whole
and do not account for fuel savings associated with the program. Table
I-22 shows EPA's estimated incremental cost increase of the average new
vehicle for each model year 2017-2025. The values shown are incremental
to a baseline vehicle and are not cumulative. In other words, the
estimated increase for 2017 model year cars is $194 relative to a 2017
model year car meeting the MY 2016 standards. The estimated increase
[[Page 74896]]
for a 2018 model year car is $353 relative to a 2018 model year car
meeting the MY 2016 standards (not $194 plus $353).
[GRAPHIC] [TIFF OMITTED] TP01DE11.026
D. Background and Comparison of NHTSA and EPA Statutory Authority
This section provides the agencies' respective statutory
authorities under which CAFE and GHG standards are established.
1. NHTSA Statutory Authority
NHTSA establishes CAFE standards for passenger cars and light
trucks for each model year under EPCA, as amended by EISA. EPCA
mandates a
[[Page 74897]]
motor vehicle fuel economy regulatory program to meet the various
facets of the need to conserve energy, including the environmental and
foreign policy implications of petroleum use by motor vehicles. EPCA
allocates the responsibility for implementing the program between NHTSA
and EPA as follows: NHTSA sets CAFE standards for passenger cars and
light trucks; EPA establishes the procedures for testing, tests
vehicles, collects and analyzes manufacturers' data, and calculates the
individual and average fuel economy of each manufacturer's passenger
cars and light trucks; and NHTSA enforces the standards based on EPA's
calculations.
a. Standard Setting
We have summarized below the most important aspects of standard
setting under EPCA, as amended by EISA. For each future model year,
EPCA requires that NHTSA establish separate passenger car and light
truck standards at ``the maximum feasible average fuel economy level
that it decides the manufacturers can achieve in that model year,''
based on the agency's consideration of four statutory factors:
technological feasibility, economic practicability, the effect of other
standards of the Government on fuel economy, and the need of the nation
to conserve energy. EPCA does not define these terms or specify what
weight to give each concern in balancing them; thus, NHTSA defines them
and determines the appropriate weighting that leads to the maximum
feasible standards given the circumstances in each CAFE standard
rulemaking.\67\ For MYs 2011-2020, EPCA further requires that separate
standards for passenger cars and for light trucks be set at levels high
enough to ensure that the CAFE of the industry-wide combined fleet of
new passenger cars and light trucks reaches at least 35 mpg not later
than MY 2020. For model years after 2020, standards need simply be set
at the maximum feasible level.
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\67\ See Center for Biological Diversity v. NHTSA, 538 F.3d.
1172, 1195 (9th Cir. 2008) (``The EPCA clearly requires the agency
to consider these four factors, but it gives NHTSA discretion to
decide how to balance the statutory factors--as long as NHTSA's
balancing does not undermine the fundamental purpose of the EPCA:
energy conservation.'').
---------------------------------------------------------------------------
Because EPCA states that standards must be set for ``* * *
automobiles manufactured by manufacturers,'' and because Congress
provided specific direction on how small-volume manufacturers could
obtain exemptions from the passenger car standards, NHTSA has long
interpreted its authority as pertaining to setting standards for the
industry as a whole. Prior to this NPRM, some manufacturers raised with
NHTSA the possibility of NHTSA and EPA setting alternate standards for
part of the industry that met certain (relatively low) sales volume
criteria--specifically, that separate standards be set so that
``intermediate-size,'' limited-line manufacturers do not have to meet
the same levels of stringency that larger manufacturers have to meet
until several years later. NHTSA seeks comment on whether or how EPCA,
as amended by EISA, could be interpreted to allow such alternate
standards for certain parts of the industry.
i. Factors That Must Be Considered in Deciding the Appropriate
Stringency of CAFE Standards
(1) Technological Feasibility
``Technological feasibility'' refers to whether a particular method
of improving fuel economy can be available for commercial application
in the model year for which a standard is being established. Thus, the
agency is not limited in determining the level of new standards to
technology that is already being commercially applied at the time of
the rulemaking, a consideration which is particularly relevant for a
rulemaking with a timeframe as long as the present one. For this
rulemaking, NHTSA has considered all types of technologies that improve
real-world fuel economy, including air-conditioner efficiency, due to
EPA's proposal to allow generation of fuel consumption improvement
values for CAFE purposes based on improvements to air-conditioner
efficiency that improves fuel efficiency.
(2) Economic Practicability
``Economic practicability'' refers to whether a standard is one
``within the financial capability of the industry, but not so stringent
as to'' lead to ``adverse economic consequences, such as a significant
loss of jobs or the unreasonable elimination of consumer choice.'' \68\
The agency has explained in the past that this factor can be especially
important during rulemakings in which the automobile industry is facing
significantly adverse economic conditions (with corresponding risks to
jobs). Consumer acceptability is also an element of economic
practicability, one which is particularly difficult to gauge during
times of uncertain fuel prices.\69\ In a rulemaking such as the present
one, looking out into the more distant future, economic practicability
is a way to consider the uncertainty surrounding future market
conditions and consumer demand for fuel economy in addition to other
vehicle attributes. In an attempt to ensure the economic practicability
of attribute-based standards, NHTSA considers a variety of factors,
including the annual rate at which manufacturers can increase the
percentage of their fleet that employ a particular type of fuel-saving
technology, the specific fleet mixes of different manufacturers, and
assumptions about the cost of the standards to consumers and consumers'
valuation of fuel economy, among other things.
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\68\ 67 FR 77015, 77021 (Dec. 16, 2002).
\69\ See, e.g., Center for Auto Safety v. NHTSA (CAS), 793 F.2d
1322 (D.C. Cir. 1986) (Administrator's consideration of market
demand as component of economic practicability found to be
reasonable); Public Citizen v. NHTSA, 848 F.2d 256 (Congress
established broad guidelines in the fuel economy statute; agency's
decision to set lower standard was a reasonable accommodation of
conflicting policies).
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It is important to note, however, that the law does not preclude a
CAFE standard that poses considerable challenges to any individual
manufacturer. The Conference Report for EPCA, as enacted in 1975, makes
clear, and the case law affirms, ``a determination of maximum feasible
average fuel economy should not be keyed to the single manufacturer
which might have the most difficulty achieving a given level of average
fuel economy.'' \70\ Instead, NHTSA is compelled ``to weigh the
benefits to the nation of a higher fuel economy standard against the
difficulties of individual automobile manufacturers.'' \71\ The law
permits CAFE standards exceeding the projected capability of any
particular manufacturer as long as the standard is economically
practicable for the industry as a whole. Thus, while a particular CAFE
standard may pose difficulties for one manufacturer, it may also
present opportunities for another. NHTSA has long held that the CAFE
program is not necessarily intended to maintain the competitive
positioning of each particular company. Rather, it is intended to
enhance the fuel economy of the vehicle fleet on American roads, while
protecting motor vehicle safety and being mindful of the risk to the
overall United States economy.
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\70\ CEI-I, 793 F.2d 1322, 1352 (D.C. Cir. 1986).
\71\ Id.
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(3) The Effect of Other Motor Vehicle Standards of the Government on
Fuel Economy
``The effect of other motor vehicle standards of the Government on
fuel economy,'' involves an analysis of the effects of compliance with
emission,
[[Page 74898]]
safety, noise, or damageability standards on fuel economy capability
and thus on average fuel economy. In previous CAFE rulemakings, the
agency has said that pursuant to this provision, it considers the
adverse effects of other motor vehicle standards on fuel economy. It
said so because, from the CAFE program's earliest years \72\ until
present, the effects of such compliance on fuel economy capability over
the history of the CAFE program have been negative ones. For example,
safety standards that have the effect of increasing vehicle weight
lower vehicle fuel economy capability and thus decrease the level of
average fuel economy that the agency can determine to be feasible.
---------------------------------------------------------------------------
\72\ 42 FR 63184, 63188 (Dec. 15, 1977). See also 42 FR 33534,
33537 (Jun. 30, 1977).
---------------------------------------------------------------------------
In the wake of Massachusetts v. EPA and of EPA's endangerment
finding, granting of a waiver to California for its motor vehicle GHG
standards, and its own establishment of GHG standards, NHTSA is
confronted with the issue of how to treat those standards under EPCA/
EISA, such as in the context of the ``other motor vehicle standards''
provision. To the extent the GHG standards result in increases in fuel
economy, they would do so almost exclusively as a result of inducing
manufacturers to install the same types of technologies used by
manufacturers in complying with the CAFE standards.
Comment is requested on whether and in what way the effects of the
California and EPA standards should be considered under EPCA/EISA,
e.g., under the ``other motor vehicle standards'' provision, consistent
with NHTSA's independent obligation under EPCA/EISA to issue CAFE
standards. The agency has already considered EPA's proposal and the
harmonization benefits of the National Program in developing its own
proposal.
(4) The Need of the United States To Conserve Energy
``The need of the United States to conserve energy'' means ``the
consumer cost, national balance of payments, environmental, and foreign
policy implications of our need for large quantities of petroleum,
especially imported petroleum.'' \73\ Environmental implications
principally include reductions in emissions of carbon dioxide and
criteria pollutants and air toxics. Prime examples of foreign policy
implications are energy independence and security concerns.
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\73\ 42 FR 63184, 63188 (1977).
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(5) Fuel Prices and the Value of Saving Fuel
Projected future fuel prices are a critical input into the
preliminary economic analysis of alternative CAFE standards, because
they determine the value of fuel savings both to new vehicle buyers and
to society, which is related to the consumer cost (or rather, benefit)
of our need for large quantities of petroleum. In this rule, NHTSA
relies on fuel price projections from the U.S. Energy Information
Administration's (EIA) most recent Annual Energy Outlook (AEO) for this
analysis. Federal government agencies generally use EIA's projections
in their assessments of future energy-related policies.
(6) Petroleum Consumption and Import Externalities
U.S. consumption and imports of petroleum products impose costs on
the domestic economy that are not reflected in the market price for
crude petroleum, or in the prices paid by consumers of petroleum
products such as gasoline. These costs include (1) Higher prices for
petroleum products resulting from the effect of U.S. oil import demand
on the world oil price; (2) the risk of disruptions to the U.S. economy
caused by sudden reductions in the supply of imported oil to the U.S.;
and (3) expenses for maintaining a U.S. military presence to secure
imported oil supplies from unstable regions, and for maintaining the
strategic petroleum reserve (SPR) to provide a response option should a
disruption in commercial oil supplies threaten the U.S. economy, to
allow the United States to meet part of its International Energy Agency
obligation to maintain emergency oil stocks, and to provide a national
defense fuel reserve. Higher U.S. imports of crude oil or refined
petroleum products increase the magnitude of these external economic
costs, thus increasing the true economic cost of supplying
transportation fuels above the resource costs of producing them.
Conversely, reducing U.S. imports of crude petroleum or refined fuels
or reducing fuel consumption can reduce these external costs.
(7) Air Pollutant Emissions
While reductions in domestic fuel refining and distribution that
result from lower fuel consumption will reduce U.S. emissions of
various pollutants, additional vehicle use associated with the rebound
effect \74\ from higher fuel economy will increase emissions of these
pollutants. Thus, the net effect of stricter CAFE standards on
emissions of each pollutant depends on the relative magnitudes of its
reduced emissions in fuel refining and distribution, and increases in
its emissions from vehicle use. Fuel savings from stricter CAFE
standards also result in lower emissions of CO2, the main
greenhouse gas emitted as a result of refining, distribution, and use
of transportation fuels. Reducing fuel consumption reduces carbon
dioxide emissions directly, because the primary source of
transportation-related CO2 emissions is fuel combustion in
internal combustion engines.
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\74\ The ``rebound effect'' refers to the tendency of drivers to
drive their vehicles more as the cost of doing so goes down, as when
fuel economy improves.
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NHTSA has considered environmental issues, both within the context
of EPCA and the National Environmental Policy Act, in making decisions
about the setting of standards from the earliest days of the CAFE
program. As courts of appeal have noted in three decisions stretching
over the last 20 years,\75\ NHTSA defined the ``need of the Nation to
conserve energy'' in the late 1970s as including ``the consumer cost,
national balance of payments, environmental, and foreign policy
implications of our need for large quantities of petroleum, especially
imported petroleum.'' \76\ In 1988, NHTSA included climate change
concepts in its CAFE notices and prepared its first environmental
assessment addressing that subject.\77\ It cited concerns about climate
change as one of its reasons for limiting the extent of its reduction
of the CAFE standard for MY 1989 passenger cars.\78\ Since then, NHTSA
has considered the benefits of reducing tailpipe carbon dioxide
emissions in its fuel economy rulemakings pursuant to the statutory
requirement to consider the nation's need to conserve energy by
reducing fuel consumption.
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\75\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1325 n. 12
(D.C. Cir. 1986); Public Citizen v. NHTSA, 848 F.2d 256, 262-3 n. 27
(D.C. Cir. 1988) (noting that ``NHTSA itself has interpreted the
factors it must consider in setting CAFE standards as including
environmental effects''); and Center for Biological Diversity v.
NHTSA, 538 F.3d 1172 (9th Cir. 2007).
\76\ 42 FR 63184, 63188 (Dec. 15, 1977) (emphasis added).
\77\ 53 FR 33080, 33096 (Aug. 29, 1988).
\78\ 53 FR 39275, 39302 (Oct. 6, 1988).
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ii. Other Factors Considered by NHTSA
NHTSA considers the potential for adverse safety consequences when
establishing CAFE standards. This practice is recognized approvingly in
case law.\79\ Under the universal or ``flat''
[[Page 74899]]
CAFE standards that NHTSA was previously authorized to establish, the
primary risk to safety came from the possibility that manufacturers
would respond to higher standards by building smaller, less safe
vehicles in order to ``balance out'' the larger, safer vehicles that
the public generally preferred to buy. Under the attribute-based
standards being proposed in this action, that risk is reduced because
building smaller vehicles tends to raise a manufacturer's overall CAFE
obligation, rather than only raising its fleet average CAFE. However,
even under attribute-based standards, there is still risk that
manufacturers will rely on down-weighting to improve their fuel economy
(for a given vehicle at a given footprint target) in ways that may
reduce safety.\80\
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\79\ As the United States Court of Appeals pointed out in
upholding NHTSA's exercise of judgment in setting the 1987-1989
passenger car standards, ``NHTSA has always examined the safety
consequences of the CAFE standards in its overall consideration of
relevant factors since its earliest rulemaking under the CAFE
program.'' Competitive Enterprise Institute v. NHTSA (CEI I), 901
F.2d 107, 120 at n.11 (D.C. Cir. 1990).
\80\ For example, by reducing the mass of the smallest vehicles
rather than the largest, or by reducing vehicle overhang outside the
space measured as ``footprint,'' which results in less crush space.
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iii. Factors That NHTSA Is Statutorily Prohibited From Considering in
Setting Standards
EPCA provides that in determining the level at which it should set
CAFE standards for a particular model year, NHTSA may not consider the
ability of manufacturers to take advantage of several EPCA provisions
that facilitate compliance with the CAFE standards and thereby reduce
the costs of compliance. Specifically, in determining the maximum
feasible level of fuel economy for passenger cars and light trucks,
NHTSA cannot consider the fuel economy benefits of ``dedicated''
alternative fuel vehicles (like battery electric vehicles or natural
gas vehicles), must consider dual-fueled automobiles to be operated
only on gasoline or diesel fuel, and may not consider the ability of
manufacturers to use, trade, or transfer credits.\81\ This provision
limits, to some extent, the fuel economy levels that NHTSA can find to
be ``maximum feasible''--if NHTSA cannot consider the fuel economy of
electric vehicles, for example, NHTSA cannot set a standards predicated
on manufacturers' usage of electric vehicles to meet the standards.
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\81\ 49 U.S.C. 32902(h). We note, as discussed in greater detail
in Section IV, that NHTSA interprets 32902(h) as reflecting
Congress' intent that statutorily-mandated compliance flexibilities
remain flexibilities. When a compliance flexibility is not
statutorily mandated, therefore, or when it ceases to be available
under the statute, we interpret 32902(h) as no longer binding the
agency's determination of the maximum feasible levels of fuel
economy. For example, when the manufacturing incentive for dual-
fueled automobiles under 49 U.S.C. 32905 and 32906 expires in MY
2019, there is no longer a flexibility left to protect per 32902(h),
so NHTSA considers the calculated fuel economy of plug-in hybrid
electric vehicles for purposes of determining the maximum feasible
standards in MYs 2020 and beyond.
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iv. Weighing and Balancing of Factors
NHTSA has broad discretion in balancing the above factors in
determining the average fuel economy level that the manufacturers can
achieve. Congress ``specifically delegated the process of setting * * *
fuel economy standards with broad guidelines concerning the factors
that the agency must consider.'' \82\ The breadth of those guidelines,
the absence of any statutorily prescribed formula for balancing the
factors, the fact that the relative weight to be given to the various
factors may change from rulemaking to rulemaking as the underlying
facts change, and the fact that the factors may often be conflicting
with respect to whether they militate toward higher or lower standards
give NHTSA discretion to decide what weight to give each of the
competing policies and concerns and then determine how to balance
them--``as long as NHTSA's balancing does not undermine the fundamental
purpose of the EPCA: energy conservation,'' \83\ and as long as that
balancing reasonably accommodates ``conflicting policies that were
committed to the agency's care by the statute.'' \84\ Thus, EPCA does
not mandate that any particular number be adopted when NHTSA determines
the level of CAFE standards.
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\82\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, at 1341
(D.C. Cir. 1986).
\83\ CBD v. NHTSA, 538 F.3d at 1195 (9th Cir. 2008).
\84\ Id.
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v. Other Requirements Related to Standard Setting
The standards for passenger cars and for light trucks must increase
ratably each year through MY 2020.\85\ This statutory requirement is
interpreted, in combination with the requirement to set the standards
for each model year at the level determined to be the maximum feasible
level that manufacturers can achieve for that model year, to mean that
the annual increases should not be disproportionately large or small in
relation to each other.\86\ Standards after 2020 must simply be set at
the maximum feasible level.\87\
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\85\ 49 U.S.C. 32902(b)(2)(C).
\86\ See 74 FR 14196, 14375-76 (Mar. 30, 2009).
\87\ 49 U.S.C. 32902(b)(2)(B).
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The standards for passenger cars and light trucks must also be
based on one or more vehicle attributes, like size or weight, which
correlate with fuel economy and must be expressed in terms of a
mathematical function.\88\ Fuel economy targets are set for individual
vehicles and increase as the attribute decreases and vice versa. For
example, footprint-based standards assign higher fuel economy targets
to smaller-footprint vehicles and lower ones to larger footprint-
vehicles. The fleetwide average fuel economy that a particular
manufacturer is required to achieve depends on the footprint mix of its
fleet, i.e., the proportion of the fleet that is small-, medium-, or
large-footprint.
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\88\ 49 U.S.C. 32902(b)(3).
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This approach can be used to require virtually all manufacturers to
increase significantly the fuel economy of a broad range of both
passenger cars and light trucks, i.e., the manufacturer must improve
the fuel economy of all the vehicles in its fleet. Further, this
approach can do so without creating an incentive for manufacturers to
make small vehicles smaller or large vehicles larger, with attendant
implications for safety.
b. Test Procedures for Measuring Fuel Economy
EPCA provides EPA with the responsibility for establishing
procedures to measure fuel economy and to calculate CAFE. Current test
procedures measure the effects of nearly all fuel saving technologies.
EPA is considering revising the procedures for measuring fuel economy
and calculating average fuel economy for the CAFE program, however, to
account for four impacts on fuel economy not currently included in
these procedures--increases in fuel economy because of increases in
efficiency of the air conditioning system; increases in fuel economy
because of technology improvements that achieve ``off-cycle'' benefits;
incentives for use of certain hybrid technologies in a significant
percentage of pickup trucks; and incentives for achieving fuel economy
levels in a significant percentage pickup trucks that exceeds the
target curve by specified amounts, in the form of increased values
assigned for fuel economy. NHTSA has taken these proposed changes into
account in determining the proposed fuel economy standards. These
changes would be the same as program elements that are part of EPA's
greenhouse gas performance
[[Page 74900]]
standards, discussed in Section III.B.10. As discussed below, these
three elements would be implemented in the same manner as in the EPA's
greenhouse gas program--a vehicle manufacturer would have the option to
generate these fuel economy values for vehicle models that meet the
criteria for these elements and to use these values in calculating
their fleet average fuel economy. This proposed revision to CAFE
calculation is discussed in more detail in Sections III and IV below.
c. Enforcement and Compliance Flexibility
NHTSA determines compliance with the CAFE standards based on
measurements of automobile manufacturers' CAFE from EPA. If a
manufacturer's passenger car or light truck CAFE level exceeds the
applicable standard for that model year, the manufacturer earns credits
for over-compliance. The amount of credit earned is determined by
multiplying the number of tenths of a mpg by which a manufacturer
exceeds a standard for a particular category of automobiles by the
total volume of automobiles of that category manufactured by the
manufacturer for a given model year. As discussed in more detail in
Section IV.I, credits can be carried forward for 5 model years or back
for 3, and can also be transferred between a manufacturer's fleets or
traded to another manufacturer.
If a manufacturer's passenger car or light truck CAFE level does
not meet the applicable standard for that model year, NHTSA notifies
the manufacturer. The manufacturer may use ``banked'' credits to make
up the shortfall, but if there are no (or not enough) credits
available, then the manufacturer has the option to submit a ``carry
back plan'' to NHTSA. A carry back plan describes what the manufacturer
plans to do in the following three model years to earn enough credits
to make up for the shortfall through future over-compliance. NHTSA must
examine and determine whether to approve the plan.
In the event that a manufacturer does not comply with a CAFE
standard, even after the consideration of credits, EPCA provides for
the assessing of civil penalties.\89\ The Act specifies a precise
formula for determining the amount of civil penalties for such a
noncompliance. The penalty, as adjusted for inflation by law, is $5.50
for each tenth of a mpg that a manufacturer's average fuel economy
falls short of the standard for a given model year multiplied by the
total volume of those vehicles in the affected fleet (i.e., import or
domestic passenger car, or light truck), manufactured for that model
year. The amount of the penalty may not be reduced except under the
unusual or extreme circumstances specified in the statute, which have
never been exercised by NHTSA in the history of the CAFE program.
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\89\ EPCA does not provide authority for seeking to enjoin
violations of the CAFE standards.
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Unlike the National Traffic and Motor Vehicle Safety Act, EPCA does
not provide for recall and remedy in the event of a noncompliance. The
presence of recall and remedy provisions \90\ in the Safety Act and
their absence in EPCA is believed to arise from the difference in the
application of the safety standards and CAFE standards. A safety
standard applies to individual vehicles; that is, each vehicle must
possess the requisite equipment or feature that must provide the
requisite type and level of performance. If a vehicle does not, it is
noncompliant. Typically, a vehicle does not entirely lack an item or
equipment or feature. Instead, the equipment or features fails to
perform adequately. Recalling the vehicle to repair or replace the
noncompliant equipment or feature can usually be readily accomplished.
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\90\ 49 U.S.C. 30120, Remedies for defects and noncompliance.
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In contrast, a CAFE standard applies to a manufacturer's entire
fleet for a model year. It does not require that a particular
individual vehicle be equipped with any particular equipment or feature
or meet a particular level of fuel economy. It does require that the
manufacturer's fleet, as a whole, comply. Further, although under the
attribute-based approach to setting CAFE standards fuel economy targets
are established for individual vehicles based on their footprints, the
individual vehicles are not required to meet or exceed those targets.
However, as a practical matter, if a manufacturer chooses to design
some vehicles that fall below their target levels of fuel economy, it
will need to design other vehicles that exceed their targets if the
manufacturer's overall fleet average is to meet the applicable
standard.
Thus, under EPCA, there is no such thing as a noncompliant vehicle,
only a noncompliant fleet. No particular vehicle in a noncompliant
fleet is any more, or less, noncompliant than any other vehicle in the
fleet.
2. EPA Statutory Authority
Title II of the Clean Air Act (CAA) provides for comprehensive
regulation of mobile sources, authorizing EPA to regulate emissions of
air pollutants from all mobile source categories. Pursuant to these
sweeping grants of authority, EPA considers such issues as technology
effectiveness, its cost (both per vehicle, per manufacturer, and per
consumer), the lead time necessary to implement the technology, and
based on this the feasibility and practicability of potential
standards; the impacts of potential standards on emissions reductions
of both GHGs and non-GHGs; the impacts of standards on oil conservation
and energy security; the impacts of standards on fuel savings by
consumers; the impacts of standards on the auto industry; other energy
impacts; as well as other relevant factors such as impacts on safety
Pursuant to Title II of the Clean Air Act, EPA has taken a
comprehensive, integrated approach to mobile source emission control
that has produced benefits well in excess of the costs of regulation.
In developing the Title II program, the Agency's historic, initial
focus was on personal vehicles since that category represented the
largest source of mobile source emissions. Over time, EPA has
established stringent emissions standards for large truck and other
heavy-duty engines, nonroad engines, and marine and locomotive engines,
as well. The Agency's initial focus on personal vehicles has resulted
in significant control of emissions from these vehicles, and also led
to technology transfer to the other mobile source categories that made
possible the stringent standards for these other categories.
As a result of Title II requirements, new cars and SUVs sold today
have emissions levels of hydrocarbons, oxides of nitrogen, and carbon
monoxide that are 98-99% lower than new vehicles sold in the 1960s, on
a per mile basis. Similarly, standards established for heavy-duty
highway and nonroad sources require emissions rate reductions on the
order of 90% or more for particulate matter and oxides of nitrogen.
Overall ambient levels of automotive-related pollutants are lower now
than in 1970, even as economic growth and vehicle miles traveled have
nearly tripled. These programs have resulted in millions of tons of
pollution reduction and major reductions in pollution-related deaths
(estimated in the tens of thousands per year) and illnesses. The net
societal benefits of the mobile source programs are large. In its
annual reports on federal regulations, the Office of Management and
Budget reports that many of EPA's mobile source emissions standards
typically have projected benefit-to-cost ratios of 5:1 to 10:1 or more.
Follow-up studies show that long-term compliance costs to the industry
are typically lower than the
[[Page 74901]]
cost projected by EPA at the time of regulation, which result in even
more favorable real world benefit-to-cost ratios.\91\ Pollution
reductions attributable to Title II mobile source controls are critical
components to attainment of primary National Ambient Air Quality
Standards, significantly reducing the national inventory and ambient
concentrations of criteria pollutants, especially PM2.5 and ozone. See
e.g. 69 FR 38958, 38967-68 (June 29, 2004) (controls on non-road diesel
engines expected to reduce entire national inventory of PM2.5 by 3.3%
(86,000 tons) by 2020). Title II controls have also made enormous
reductions in air toxics emitted by mobile sources. For example, as a
result of EPA's 2007 mobile source air toxics standards, the cancer
risk attributable to total mobile source air toxics will be reduced by
30% in 2030 and the risk from mobile source benzene (a leukemogen) will
be reduced by 37% in 2030. (reflecting reductions of over three hundred
thousand tons of mobile source air toxic emissions) 72 FR 8428, 8430
(Feb. 26, 2007).
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\91\ OMB, 2011. 2011 Report to Congress on the Benefits and
Costs of Federal Regulations and Unfunded Mandates on State, Local,
and Tribal Entities. Office of Information and Regulatory Affairs.
June. http://www.whitehouse.gov/sites/default/files/omb/inforeg/2011_cb/2011_cba_report.pdf. Web site accessed on October 11,
2011.
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Title II emission standards have also stimulated the development of
a much broader set of advanced automotive technologies, such as on-
board computers and fuel injection systems, which are the building
blocks of today's automotive designs and have yielded not only lower
pollutant emissions, but improved vehicle performance, reliability, and
durability.
This proposal implements a specific provision from Title II,
section 202(a).\92\ Section 202(a)(1) of the Clean Air Act (CAA) states
that ``the Administrator shall by regulation prescribe (and from time
to time revise) * * * standards applicable to the emission of any air
pollutant from any class or classes of new motor vehicles * * *, which
in his judgment cause, or contribute to, air pollution which may
reasonably be anticipated to endanger public health or welfare.'' If
EPA makes the appropriate endangerment and cause or contribute
findings, then section 202(a) authorizes EPA to issue standards
applicable to emissions of those pollutants.
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\92\ 42 U.S.C. 7521 (a)
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Any standards under CAA section 202(a)(1) ``shall be applicable to
such vehicles * * * for their useful life.'' Emission standards set by
the EPA under CAA section 202(a)(1) are technology-based, as the levels
chosen must be premised on a finding of technological feasibility.
Thus, standards promulgated under CAA section 202(a) are to take effect
only ``after providing such period as the Administrator finds necessary
to permit the development and application of the requisite technology,
giving appropriate consideration to the cost of compliance within such
period'' (section 202 (a)(2); see also NRDC v. EPA, 655 F. 2d 318, 322
(DC Cir. 1981)). EPA is afforded considerable discretion under section
202(a) when assessing issues of technical feasibility and availability
of lead time to implement new technology. Such determinations are
``subject to the restraints of reasonableness'', which ``does not open
the door to `crystal ball' inquiry.'' NRDC, 655 F. 2d at 328, quoting
International Harvester Co. v. Ruckelshaus, 478 F. 2d 615, 629 (DC Cir.
1973). However, ``EPA is not obliged to provide detailed solutions to
every engineering problem posed in the perfection of the trap-oxidizer.
In the absence of theoretical objections to the technology, the agency
need only identify the major steps necessary for development of the
device, and give plausible reasons for its belief that the industry
will be able to solve those problems in the time remaining. The EPA is
not required to rebut all speculation that unspecified factors may
hinder `real world' emission control.'' NRDC, 655 F. 2d at 333-34. In
developing such technology-based standards, EPA has the discretion to
consider different standards for appropriate groupings of vehicles
(``class or classes of new motor vehicles''), or a single standard for
a larger grouping of motor vehicles (NRDC, 655 F. 2d at 338).
Although standards under CAA section 202(a)(1) are technology-
based, they are not based exclusively on technological capability. EPA
has the discretion to consider and weigh various factors along with
technological feasibility, such as the cost of compliance (see section
202(a) (2)), lead time necessary for compliance (section 202(a)(2)),
safety (see NRDC, 655 F. 2d at 336 n. 31) and other impacts on
consumers,\93\ and energy impacts associated with use of the
technology. See George E. Warren Corp. v. EPA, 159 F.3d 616, 623-624
(DC Cir. 1998) (ordinarily permissible for EPA to consider factors not
specifically enumerated in the Act).
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\93\ Since its earliest Title II regulations, EPA has considered
the safety of pollution control technologies. See 45 Fed. Reg.
14,496, 14,503 (1980). (``EPA would not require a particulate
control technology that was known to involve serious safety
problems. If during the development of the trap-oxidizer safety
problems are discovered, EPA would reconsider the control
requirements implemented by this rulemaking'').
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In addition, EPA has clear authority to set standards under CAA
section 202(a) that are technology forcing when EPA considers that to
be appropriate, but is not required to do so (as compared to standards
set under provisions such as section 202(a)(3) and section 213(a)(3)).
EPA has interpreted a similar statutory provision, CAA section 231, as
follows:
While the statutory language of section 231 is not identical to
other provisions in title II of the CAA that direct EPA to establish
technology-based standards for various types of engines, EPA
interprets its authority under section 231 to be somewhat similar to
those provisions that require us to identify a reasonable balance of
specified emissions reduction, cost, safety, noise, and other
factors. See, e.g., Husqvarna AB v. EPA, 254 F.3d 195 (DC Cir. 2001)
(upholding EPA's promulgation of technology-based standards for
small non-road engines under section 213(a)(3) of the CAA). However,
EPA is not compelled under section 231 to obtain the ``greatest
degree of emission reduction achievable'' as per sections 213 and
202 of the CAA, and so EPA does not interpret the Act as requiring
the agency to give subordinate status to factors such as cost,
safety, and noise in determining what standards are reasonable for
aircraft engines. Rather, EPA has greater flexibility under section
231 in determining what standard is most reasonable for aircraft
engines, and is not required to achieve a ``technology forcing''
result.\94\
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\94\ 70 FR 69664, 69676, November 17, 2005.
This interpretation was upheld as reasonable in NACAA v. EPA, (489
F.3d 1221, 1230 (DC Cir. 2007)). CAA section 202(a) does not specify
the degree of weight to apply to each factor, and EPA accordingly has
discretion in choosing an appropriate balance among factors. See Sierra
Club v. EPA, 325 F.3d 374, 378 (DC Cir. 2003) (even where a provision
is technology-forcing, the provision ``does not resolve how the
Administrator should weigh all [the statutory] factors in the process
of finding the `greatest emission reduction achievable' ''). Also see
Husqvarna AB v. EPA, 254 F. 3d 195, 200 (DC Cir. 2001) (great
discretion to balance statutory factors in considering level of
technology-based standard, and statutory requirement ``to [give
appropriate] consideration to the cost of applying * * * technology''
does not mandate a specific method of cost analysis); see also Hercules
Inc. v. EPA, 598 F. 2d 91, 106 (DC Cir. 1978) (``In reviewing a
numerical standard we must ask whether the agency's numbers are within
a zone of reasonableness, not
[[Page 74902]]
whether its numbers are precisely right''); Permian Basin Area Rate
Cases, 390 U.S. 747, 797 (1968) (same); Federal Power Commission v.
Conway Corp., 426 U.S. 271, 278 (1976) (same); Exxon Mobil Gas
Marketing Co. v. FERC, 297 F. 3d 1071, 1084 (DC Cir. 2002) (same).
a. EPA's Testing Authority
Under section 203 of the CAA, sales of vehicles are prohibited
unless the vehicle is covered by a certificate of conformity. EPA
issues certificates of conformity pursuant to section 206 of the Act,
based on (necessarily) pre-sale testing conducted either by EPA or by
the manufacturer. The Federal Test Procedure (FTP or ``city'' test) and
the Highway Fuel Economy Test (HFET or ``highway'' test) are used for
this purpose. Compliance with standards is required not only at
certification but throughout a vehicle's useful life, so that testing
requirements may continue post-certification. Useful life standards may
apply an adjustment factor to account for vehicle emission control
deterioration or variability in use (section 206(a)).
Pursuant to EPCA, EPA is required to measure fuel economy for each
model and to calculate each manufacturer's average fuel economy.\95\
EPA uses the same tests--the FTP and HFET--for fuel economy testing.
EPA established the FTP for emissions measurement in the early 1970s.
In 1976, in response to the Energy Policy and Conservation Act (EPCA)
statute, EPA extended the use of the FTP to fuel economy measurement
and added the HFET.\96\ The provisions in the 1976 regulation,
effective with the 1977 model year, established procedures to calculate
fuel economy values both for labeling and for CAFE purposes. Under
EPCA, EPA is required to use these procedures (or procedures which
yield comparable results) for measuring fuel economy for cars for CAFE
purposes, but not for labeling purposes.\97\ EPCA does not pose this
restriction on CAFE test procedures for light trucks, but EPA does use
the FTP and HFET for this purpose. EPA determines fuel economy by
measuring the amount of CO2 and all other carbon compounds
(e.g. total hydrocarbons (THC) and carbon monoxide (CO)), and then, by
mass balance, calculating the amount of fuel consumed. EPA's proposed
changes to the procedures for measuring fuel economy and calculating
average fuel economy are discussed in section III.B.10.
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\95\ See 49 U.S.C. 32904(c).
\96\ See 41 FR 38674 (Sept. 10, 1976), which is codified at 40
CFR part 600.
\97\ See 49 U.S.C. 32904(c).
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b. EPA Enforcement Authority
Section 207 of the CAA grants EPA broad authority to require
manufacturers to remedy vehicles if EPA determines there are a
substantial number of noncomplying vehicles. In addition, section 205
of the CAA authorizes EPA to assess penalties of up to $37,500 per
vehicle for violations of various prohibited acts specified in the CAA.
In determining the appropriate penalty, EPA must consider a variety of
factors such as the gravity of the violation, the economic impact of
the violation, the violator's history of compliance, and ``such other
matters as justice may require.'' Unlike EPCA, the CAA does not
authorize vehicle manufacturers to pay fines in lieu of meeting
emission standards.
c. Compliance
EPA oversees testing, collects and processes test data, and
performs calculations to determine compliance with both CAA and CAFE
standards. CAA standards apply not only at the time of certification
but also throughout the vehicle's useful life, and EPA is accordingly
is proposing in-use standards as well as standards based on testing
performed at time of production. See section III.E. Both the CAA and
EPCA provide for penalties should manufacturers fail to comply with
their fleet average standards, but, unlike EPCA, there is no option for
manufacturers to pay fines in lieu of compliance with the standards.
Under the CAA, penalties are typically determined on a vehicle-specific
basis by determining the number of a manufacturer's highest emitting
vehicles that cause the fleet average standard violation. Penalties
under Title II of the CAA are capped at $25,000 per day of violation
and apply on a per vehicle basis. CAA section 205 (a).
d. Test Procedures
EPA establishes the test procedures under which compliance with
both the CAA GHG standards and the EPCA fuel economy standards are
measured. EPA's testing authority under the CAA is flexible, but
testing for fuel economy for passenger cars is by statute is limited to
the Federal Test procedure (FTP) or test procedures which provide
results which are equivalent to the FTP. 49 USC section 32904 and
section III.B, below. EPA developed and established the FTP in the
early 1970s and, after enactment of EPCA in 1976, added the Highway
Fuel Economy Test to be used in conjunction with the FTP for fuel
economy testing. EPA has also developed tests with additional cycles
(the so-called 5-cycle test) which test is used for purposes of fuel
economy labeling and is also used in the EPA program for extending off-
cycle credits under both the light-duty and (along with NHTSA) heavy-
duty vehicle GHG programs. See 75 FR at 25439; 76 FR at 57252. In this
rule, EPA is proposing to retain the FTP and HFET for purposes of
testing the fleetwide average standards, and is further proposing
modifications to the N2O measurement test procedures and the A/C
CO2 efficiency test procedures EPA initially adopted in the
2012-2016 rule.
3. Comparing the Agencies' Authority
As the above discussion makes clear, there are both important
differences between the statutes under which each agency is acting as
well as several important areas of similarity. One important difference
is that EPA's authority addresses various GHGs, while NHTSA's authority
addresses fuel economy as measured under specified test procedures and
calculated by EPA. This difference is reflected in this rulemaking in
the scope of the two standards: EPA's proposal takes into account
reductions of direct air conditioning emissions, as well as proposed
standards for methane and N2O, but NHTSA's does not, because
these things do not relate to fuel economy. A second important
difference is that EPA is proposing certain compliance flexibilities,
such as the multiplier for advanced technology vehicles, and takes
those flexibilities into account in its technical analysis and modeling
supporting its proposal. EPCA specifies a number of particular
compliance flexibilities for CAFE, and expressly prohibits NHTSA from
considering the impacts of those statutory compliance flexibilities in
setting the CAFE standard so that the manufacturers' election to avail
themselves of the permitted flexibilities remains strictly
voluntary.\98\ The Clean Air Act, on the other hand, contains no such
prohibition. These considerations result in some differences in the
technical analysis and modeling used to support EPA's and NHTSA's
proposed standards.
---------------------------------------------------------------------------
\98\ 49 U.S.C. 32902(h).
---------------------------------------------------------------------------
Another important area where the two agencies' authorities are
similar but not identical involves the transfer of credits between a
single firm's car and truck fleets. EISA revised EPCA to allow for such
credit transfers, but placed a cap on the amount of CAFE credits which
can be transferred between the car and
[[Page 74903]]
truck fleets. 49 U.S.C. 32903(g)(3). Under CAA section 202(a), EPA is
proposing to continue to allow CO2 credit transfers between
a single manufacturer's car and truck fleets, with no corresponding
limits on such transfers. In general, the EISA limit on CAFE credit
transfers is not expected to have the practical effect of limiting the
amount of CO2 emission credits manufacturers may be able to
transfer under the CAA program, recognizing that manufacturers must
comply with both the proposed CAFE standards and the proposed EPA
standards. However, it is possible that in some specific circumstances
the EPCA limit on CAFE credit transfers could constrain the ability of
a manufacturer to achieve cost savings through unlimited use of GHG
emissions credit transfers under the CAA program.
These differences, however, do not change the fact that in many
critical ways the two agencies are charged with addressing the same
basic issue of reducing GHG emissions and improving fuel economy. The
agencies are looking at the same set of control technologies (with the
exception of the air conditioning leakage-related technologies). The
standards set by each agency will drive the kind and degree of
penetration of this set of technologies across the vehicle fleet. As a
result, each agency is trying to answer the same basic question--what
kind and degree of technology penetration is necessary to achieve the
agencies' objectives in the rulemaking time frame, given the agencies'
respective statutory authorities?
In making the determination of what standards are appropriate under
the CAA and EPCA, each agency is to exercise its judgment and balance
many similar factors. NHTSA's factors are provided by EPCA:
technological feasibility, economic practicability, the effect of other
motor vehicle standards of the Government on fuel economy, and the need
of the United States to conserve energy. EPA has the discretion under
the CAA to consider many related factors, such as the availability of
technologies, the appropriate lead time for introduction of technology,
and based on this the feasibility and practicability of their
standards; the impacts of their standards on emissions reductions (of
both GHGs and non-GHGs); the impacts of their standards on oil
conservation; the impacts of their standards on fuel savings by
consumers; the impacts of their standards on the auto industry; as well
as other relevant factors such as impacts on safety. Conceptually,
therefore, each agency is considering and balancing many of the same
concerns, and each agency is making a decision that at its core is
answering the same basic question of what kind and degree of technology
penetration is it appropriate to call for in light of all of the
relevant factors in a given rulemaking, for the model years concerned.
Finally, each agency has the authority to take into consideration
impacts of the standards of the other agency. EPCA calls for NHTSA to
take into consideration the effects of EPA's emissions standards on
fuel economy capability (see 49 U.S.C. 32902 (f)), and EPA has the
discretion to take into consideration NHTSA's CAFE standards in
determining appropriate action under section 202(a). This is consistent
with the Supreme Court's statement that EPA's mandate to protect public
health and welfare is wholly independent from NHTSA's mandate to
promote energy efficiency, but there is no reason to think the two
agencies cannot both administer their obligations and yet avoid
inconsistency. Massachusetts v. EPA, 549 U.S. 497, 532 (2007).
In this context, it is in the Nation's interest for the two
agencies to continue to work together in developing their respective
proposed standards, and they have done so. For example, the agencies
have committed considerable effort to develop a joint Technical Support
Document that provides a technical basis underlying each agency's
analyses. The agencies also have worked closely together in developing
and reviewing their respective modeling, to develop the best analysis
and to promote technical consistency. The agencies have developed a
common set of attribute-based curves that each agency supports as
appropriate both technically and from a policy perspective. The
agencies have also worked closely to ensure that their respective
programs will work in a coordinated fashion, and will provide
regulatory compatibility that allows auto manufacturers to build a
single national light-duty fleet that would comply with both the GHG
and the CAFE standards. The resulting overall close coordination of the
proposed GHG and CAFE standards should not be surprising, however, as
each agency is using a jointly developed technical basis to address the
closely intertwined challenges of energy security and climate change.
As set out in detail in Sections III and IV of this notice, both
EPA and NHTSA believe the agencies' proposals are fully justified under
their respective statutory criteria. The proposed standards are
feasible in each model year within the lead time provided, based on the
agencies' projected increased use of various technologies which in most
cases are already in commercial application in the fleet to varying
degrees. Detailed modeling of the technologies that could be employed
by each manufacturer supports this initial conclusion. The agencies
also carefully assessed the costs of the proposed rules, both for the
industry as a whole and per manufacturer, as well as the costs per
vehicle, and consider these costs to be reasonable during the
rulemaking time frame and recoverable (from fuel savings). The agencies
recognize the significant increase in the application of technology
that the proposed standards would require across a high percentage of
vehicles, which will require the manufacturers to devote considerable
engineering and development resources before 2017 laying the critical
foundation for the widespread deployment of upgraded technology across
a high percentage of the 2017-2025 fleet. This clearly will be
challenging for automotive manufacturers and their suppliers,
especially in the current economic climate, and given the stringency of
the recently-established MYs 2012-2016 standards. However, based on all
of the analyses performed by the agencies, our judgment is that it is a
challenge that can reasonably be met.
The agencies also evaluated the impacts of these standards with
respect to the expected reductions in GHGs and oil consumption and,
found them to be very significant in magnitude. The agencies considered
other factors such as the impacts on noise, energy, and vehicular
congestion. The impact on safety was also given careful consideration.
Moreover, the agencies quantified the various costs and benefits of the
proposed standards, to the extent practicable. The agencies' analyses
to date indicate that the overall quantified benefits of the proposed
standards far outweigh the projected costs. All of these factors
support the reasonableness of the proposed standards. See section III
(proposed GHG standards) and section IV (proposed CAFE standards) for a
detailed discussion of each agency's basis for its selection of its
proposed standards.
The fact that the benefits are estimated to considerably exceed
their costs supports the view that the proposed standards represent an
appropriate balance of the relevant statutory factors. In drawing this
conclusion, the agencies acknowledge the uncertainties and limitations
of the analyses. For example, the analysis of the benefits is highly
dependent on the estimated price of fuel projected out many years into
the future. There is also significant uncertainty in the potential
[[Page 74904]]
range of values that could be assigned to the social cost of carbon.
There are a variety of impacts that the agencies are unable to
quantify, such as non-market damages, extreme weather, socially
contingent effects, or the potential for longer-term catastrophic
events, or the impact on consumer choice. The cost-benefit analyses are
one of the important things the agencies consider in making a judgment
as to the appropriate standards to propose under their respective
statutes. Consideration of the results of the cost-benefit analyses by
the agencies, however, includes careful consideration of the
limitations discussed above.
II. Joint Technical Work Completed for This Proposal
A. Introduction
In this section, NHTSA and EPA discuss several aspects of their
joint technical analyses. These analyses are common to the development
of each agency's standards. Specifically we discuss: the development of
the vehicle market forecast used by each agency for assessing costs,
benefits, and effects, the development of the attribute-based standard
curve shapes, the technologies the agencies evaluated and their costs
and effectiveness, the economic assumptions the agencies included in
their analyses, a description of the air conditioning and off-cycle
technology (credit) programs, as well as the effects of the proposed
standards on vehicle safety. The Joint Technical Support Document (TSD)
discusses the agencies' joint technical work in more detail.
The agencies have based today's proposal on a very significant body
of data and analysis that we believe is the best information currently
available on the full range of technical and other inputs utilized in
our respective analyses. As noted in various places throughout this
preamble, the draft Joint TSD, the NHTSA preliminary RIA, and the EPA
draft RIA, we expect new information will become available between the
proposal and final rulemaking. This new information will come from a
range of sources: some is based on work the agencies have underway
(e.g., work on technology costs and effectiveness, potentially updating
our baseline year from model year 2008 to model year 2010); other
sources are those we expect to be released by others (e.g., the Energy
Information Agency's Annual Energy Outlook, which is published each
year, and the most recent available version of which we expect to use
for the final rule); and other information that will likely come from
the public comment process. The agencies intend to evaluate all such
new information as it becomes available, and where appropriate to
update their analysis based on such information for purposes of the
final rule. In addition, the agencies may make new information and/or
analyses available in the agencies' respective public dockets for this
rulemaking prior to the final rule, where that is appropriate, in order
to facilitate public comment. We encourage all stakeholders to
periodically check the two agencies' dockets between the proposal and
final rules for any potential new docket submissions from the agencies.
B. Developing the Future Fleet for Assessing Costs, Benefits, and
Effects
1. Why did the agencies establish a baseline and reference vehicle
fleet?
In order to calculate the impacts of the EPA and NHTSA regulations,
it is necessary to estimate the composition of the future vehicle fleet
absent these regulations, to provide a reference point relative to
which costs, benefits, and effects of the regulations are assessed. As
in the 2012-2016 light duty vehicle rulemaking, EPA and NHTSA have
developed this comparison fleet in two parts. The first step was to
develop a baseline fleet based on model year 2008 data. This baseline
includes vehicle sales volumes, GHG/fuel economy performance, and
contains a listing of the base technologies on every 2008 vehicle sold.
The second step was to project that baseline fleet volume into model
years 2017-2025. The vehicle volumes projected out to MY 2025 is
referred to as the reference fleet volumes. The third step was to
modify that MY 2017-2025 reference fleet such that it reflects
technology manufacturers could apply if MY 2016 standards are extended
without change through MY 2025.\99\ Each agency used its modeling
system to develop a modified or final reference fleet, or adjusted
baseline, for use in its analysis of regulatory alternatives, as
discussed below and in Chapter 1 of the EPA draft RIA. All of the
agencies' estimates of emission reductions, fuel economy improvements,
costs, and societal impacts are developed in relation to the respective
reference fleets. This section discusses the first two steps,
development of the baseline fleet and the reference fleet.
---------------------------------------------------------------------------
\99\ EPA's MY 2016 GHG standards under the CAA continue into the
future until they are changed. While NHTSA must actively promulgate
standards in order for CAFE standards to extend past MY 2016, the
agency has, as in all recent CAFE rulemakings, defined a no-action
(i.e., baseline) regulatory alternative as an indefinite extension
of the last-promulgated CAFE standards for purposes of the main
analysis of the standards in this preamble.
---------------------------------------------------------------------------
EPA and NHTSA used a transparent approach to developing the
baseline and reference fleets, largely working from publicly available
data. Because both input and output sheets from our modeling are
public, stakeholders can verify and check EPA's and NHTSA's modeling,
and perform their own analyses with these datasets.\100\
---------------------------------------------------------------------------
\100\ EPA's Omega Model and input sheets are available at http://www.epa.gov/oms/climate/models.htm; DOT/NHTSA's CAFE Compliance and
Effects Modeling System (commonly known as the ``Volpe Model'') and
input and output sheets are available at http://www.nhtsa.gov/fuel-economy.
---------------------------------------------------------------------------
2. How Did the Agencies Develop the Baseline Vehicle Fleet?
NHTSA and EPA developed a baseline fleet comprised of model year
2008 data gathered from EPA's emission and fuel economy database. This
baseline fleet was originally developed by EPA and NHTSA for the 2012-
2016 final rule, and was updated for this proposal.\101\ The new fleet
has the model year 2008 vehicle's volumes and attributes along with the
addition of projected volumes from 2017 to 2025. It also has some
expanded footprint data for pickup trucks that was needed for a more
detailed analysis of the truck curve.
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\101\ Further discussion of the development of the 2008 baseline
fleet for the MY2012-2016 rule can be found at 75 Fed. Reg. 25324,
25349 (May 7, 2010).
---------------------------------------------------------------------------
In this proposed rulemaking, the agencies are again choosing to use
model year 2008 vehicle data to be the basis of the baseline fleet, but
for different reasons than in the 2012-2016 final rule. Model year 2008
is now the most recent model year for which the industry had normal
sales. Model year 2009 data is available, but the agencies believe that
model year was disrupted by the economic downturn and the bankruptcies
of both General Motors and Chrysler resulting in a significant
reduction in the number of vehicles sold by both companies and the
industry as a whole. These abnormalities led the agencies to conclude
that 2009 data was not representative for projecting the future fleet.
Model Year 2010 data was not complete because not all manufacturers
have yet submitted it to EPA, and was thus not available in time for it
to be used for this proposal. Therefore, the agencies chose to use
model year 2008 again as the baseline since it was the latest complete
representative and transparent data set available. However, the
agencies will consider using Model Year 2010 for the final rule, based
on availability and an
[[Page 74905]]
analysis of the data representativeness. To the extent the MY 2010 data
becomes available during the comment period the agencies will place a
copy of this data in our respective dockets. We request comments on the
relative merits of using MY 2008 and MY 2010 data, and whether one
provides a better foundation than the other for purposes of using such
data as the foundation for a market forecast extending through MY 2025.
The baseline fleet reflects all fuel economy technologies in use on
MY 2008 light duty vehicles. The 2008 emission and fuel economy
database included data on vehicle production volume, fuel economy,
engine size, number of engine cylinders, transmission type, fuel type,
etc., however it did not contain complete information on technologies.
Thus, the agencies relied on publicly available data like the more
complete technology descriptions from Ward's Automotive Group.\102\ In
a few instances when required vehicle information (such as vehicle
footprint) was not available from these two sources, the agencies
obtained this information from publicly accessible internet sites such
as Motortrend.com and Edmunds.com.\103\ A description of all of the
technologies used in modeling the 2008 vehicle fleet and how it was
constructed are available in Chapter 1 of the Joint Draft TSD.
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\102\ Note that WardsAuto.com is a fee-based service, but all
information is public to subscribers.
\103\ Motortrend.com and Edmunds.com are free, no-fee internet
sites.
---------------------------------------------------------------------------
Footprint data for the baseline fleet came mainly from internet
searches, though detailed information about the pickup truck footprints
with volumes was not available online. Where this information was
lacking, the agencies used manufacturer product plan data for 2008
model year to find out the correct number footprint and distribution of
footprints. The footprint data for pickup trucks was expanded from the
original data used in the previous rulemaking. The agencies obtained
this footprint data from MY 2008 product plans submitted by the various
manufacturers, which can be made public at this time because by now all
MY 2008 vehicle models are already in production, which makes footprint
data about them essentially public information. A description of
exactly how the agencies obtained all the footprints is available in
Chapter 1 of the TSD.
3. How Did the Agencies Develop the Projected MY 2017-2025 Vehicle
Reference Fleet?
As in the 2012-2016 light duty vehicle rulemaking, EPA and NHTSA
have based the projection of total car and total light truck sales for
MYs 2017-2025 on projections made by the Department of Energy's Energy
Information Administration (EIA). See 75 FR at 25349. EIA publishes a
mid-term projection of national energy use called the Annual Energy
Outlook (AEO). This projection utilizes a number of technical and
econometric models which are designed to reflect both economic and
regulatory conditions expected to exist in the future. In support of
its projection of fuel use by light-duty vehicles, EIA projects sales
of new cars and light trucks. EIA published its Early Annual Energy
Outlook for 2011 in December 2010. EIA released updated data to NHTSA
in February (Interim AEO). The final release of AEO for 2011 came out
in May 2011, but by that time EPA/NHTSA had already prepared modeling
runs for potential 2017-2025 standards using the interim data release
to NHTSA. EPA and NHTSA are using the interim data release for this
proposal, but intend to use the newest version of AEO available for the
FRM.
The agencies used the Energy Information Administration's (EIA's)
National Energy Modeling System (NEMS) to estimate the future relative
market shares of passenger cars and light trucks. However, NEMS
methodology includes shifting vehicle sales volume, starting after
2007, away from fleets with lower fuel economy (the light-truck fleet)
towards vehicles with higher fuel economies (the passenger car fleet)
in order to facilitate projected compliance with CAFE and GHG
standards. Because we use our market projection as a baseline relative
to which we measure the effects of new standards, and we attempt to
estimate the industry's ability to comply with new standards without
changing product mix (i.e., we analyze the effects of the proposed
rules assuming manufacturers will not change fleet composition as a
compliance strategy, as opposed to changes that might happen due to
market forces), the Interim AEO 2011-projected shift in passenger car
market share as a result of required fuel economy improvements creates
a circularity. Therefore, for the current analysis, the agencies
developed a new projection of passenger car and light truck sales
shares by running scenarios from the Interim AEO 2011 reference case
that first deactivate the above-mentioned sales-volume shifting
methodology and then hold post-2017 CAFE standards constant at MY 2016
levels. As discussed in Chapter 1 of the agencies' joint Technical
Support Document, incorporating these changes reduced the NEMS-
projected passenger car share of the light vehicle market by an average
of about 5% during 2017-2025.
In the AEO 2011 Interim data, EIA projects that total light-duty
vehicle sales will gradually recover from their currently depressed
levels by around 2013. In 2017, car sales are projected to be 8.4
million (53 percent) and truck sales are projected to be 7.3 million
(47 percent). Although the total level of sales of 15.8 million units
is similar to pre-2008 levels, the fraction of car sales is projected
to be higher than that existing in the 2000-2007 timeframe. This
projection reflects the impact of assumed higher fuel prices. Sales
projections of cars and trucks for future model years can be found in
Chapter 1 of the joint TSD.
In addition to a shift towards more car sales, sales of segments
within both the car and truck markets have been changing and are
expected to continue to change. Manufacturers are introducing more
crossover utility vehicles (CUVs), which offer much of the utility of
sport utility vehicles (SUVs) but use more car-like designs. The AEO
2011 report does not, however, distinguish such changes within the car
and truck classes. In order to reflect these changes in fleet makeup,
EPA and NHTSA used CSM Worldwide (CSM) as they did in the 2012-2016
rulemaking analysis. EPA and NHTSA believe that CSM is the best source
available for a long range forecast for 2017-2025, though when EPA and
NHTSA contacted several forecasting firms none of them offered
comparably-detailed forecasting for that time frame. NHTSA and EPA
decided to use the forecast from CSM for several reasons presented in
the Joint TSD chapter I.
The long range forecast from CSM Worldwide is a custom forecast
covering the years 2017-2025 which the agencies purchased from CSM in
December of 2009. CSM provides quarterly sales forecasts for the
automotive industry, and updates their data on the industry quarter.
For the public's reference, a copy of CSM's long range forecast has
been placed in the docket for this rulemaking.\104\ EPA and NHTSA hope
to purchase and use an updated forecast,
[[Page 74906]]
whether from CSM or other appropriate sources, before the final
rulemaking. To the extent that such a forecast becomes available during
the comment period the agencies will place a copy in our respective
dockets.
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\104\ The CSM Sales Forecast Excel file (``CSM North America
Sales Forecasts 2017-2025 for the Docket'') is available in the
docket (Docket EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------
The next step was to project the CSM forecasts for relative sales
of cars and trucks by manufacturer and by market segment onto the total
sales estimates of AEO 2011. Table II-1 and Table II-2 show the
resulting projections for the reference 2025 model year and compare
these to actual sales that occurred in the baseline 2008 model year.
Both tables show sales using the traditional definition of cars and
light trucks.
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[[Page 74907]]
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[[Page 74908]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.028
[[Page 74909]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.029
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As mentioned previously, NHTSA has changed the definition of a
truck for 2011 model year and beyond. The new definition has moved some
2 wheel drive SUVs and CUVs to the car category. Table II-3 shows the
different volumes for car and trucks based on the new and old NHTSA
definition. The table shows the difference in 2008, 2021, and 2025 to
give a feel for how the change in definition changes the car/truck
split.
[GRAPHIC] [TIFF OMITTED] TP01DE11.030
The CSM forecast provides estimates of car and truck sales by
segment and by manufacturer separately. The forecast was broken up into
two tables. One table with manufacturer volumes by year and the other
with vehicle segments percentages by year. Table II-4 and Table II-5
are examples of the data received from CSM. The task of estimating
future sales using these tables is complex. We used the same
methodology as in the previous rulemaking. A detailed description of
how the projection process was done is found in Chapter 1 of the TSD.
BILLING CODE 4910-59-P
[[Page 74910]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.031
[[Page 74911]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.032
BILLING CODE 4910-59-C
The overall result was a projection of car and truck sales for
model years 2017-2025--the reference fleet--which matched the total
sales projections of the AEO forecast and the manufacturer and segment
splits of the CSM forecast. These sales splits are shown in Table II-6
below.
[GRAPHIC] [TIFF OMITTED] TP01DE11.033
[[Page 74912]]
Given publicly- and commercially-available sources that can be made
equally transparent to all reviewers, the forecast described above
represents the agencies' best technical judgment regarding the likely
composition direction of the fleet. EPA and NHTSA recognize that it is
impossible to predict with certainty how manufacturers' product
offerings and sales volumes will evolve through MY 2025 under baseline
conditions--that is, without further changes in standards after MY
2016. The agencies have not developed alternative market forecasts to
examine corresponding sensitivity of analytical results discussed
below, and have not varied the market forecast when conducting
probabilistic uncertainty analysis discussed in NHTSA's preliminary
Regulatory Impact Analysis. The agencies invite comment regarding
alternative methods or projections to inform forecasts of the future
fleet at the level of specificity and technical completeness required
by the agencies' respective modeling systems.
The final step in the construction of the final reference fleet
involves applying additional technology to individual vehicle models--
that is, technology beyond that already present in MY 2008--reflecting
already-promulgated standards through MY 2016, and reflecting the
assumption that MY 2016 standards would apply through MY 2025. A
description of the agencies' modeling work to develop their respective
final reference (or adjusted baseline) fleets appear below in Sections
III and IV of this preamble.
C. Development of Attribute-Based Curve Shapes
1. Why are standards attribute-based and defined by a mathematical
function?
As in the MYs 2012-2016 CAFE/GHG rules, and as NHTSA did in the MY
2011 CAFE rule, NHTSA and EPA are proposing to set attribute-based CAFE
and CO2 standards that are defined by a mathematical
function. EPCA, as amended by EISA, expressly requires that CAFE
standards for passenger cars and light trucks be based on one or more
vehicle attributes related to fuel economy, and be expressed in the
form of a mathematical function.\105\ The CAA has no such requirement,
although such an approach is permissible under section 202 (a) and EPA
has used the attribute-based approach in issuing standards under
analogous provisions of the CAA (e.g., criteria pollutant standards for
non-road diesel engines using engine size as the attribute,\106\ in the
recent GHG standards for heavy duty pickups and vans using a work
factor attribute,\107\ and in the MYs 2012-2016 GHG rule itself which
used vehicle footprint as the attribute). Public comments on the MYs
2012-2016 rulemaking widely supported attribute-based standards for
both agencies' standards.
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\105\ 49 U.S.C. 32902(a)(3)(A).
\106\ 69 FR 38958 (June 29, 2004).
\107\ 76 FR 57106, 57162-64, (Sept. 15, 2011).
---------------------------------------------------------------------------
Under an attribute-based standard, every vehicle model has a
performance target (fuel economy and CO2 emissions for CAFE
and CO2 emissions standards, respectively), the level of
which depends on the vehicle's attribute (for this proposal, footprint,
as discussed below). Each manufacturers' fleet average standard is
determined by the production-weighted \108\ average (for CAFE, harmonic
average) of those targets.
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\108\ Production for sale in the United States.
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The agencies believe that an attribute-based standard is preferable
to a single-industry-wide average standard in the context of CAFE and
CO2 standards for several reasons. First, if the shape is
chosen properly, every manufacturer is more likely to be required to
continue adding more fuel efficient technology each year across their
fleet, because the stringency of the compliance obligation will depend
on the particular product mix of each manufacturer. Therefore a maximum
feasible attribute-based standard will tend to require greater fuel
savings and CO2 emissions reductions overall than would a
maximum feasible flat standard (that is, a single mpg or CO2
level applicable to every manufacturer).
Second, depending on the attribute, attribute-based standards
reduce the incentive for manufacturers to respond to CAFE and
CO2 standards in ways harmful to safety.\109\ Because each
vehicle model has its own target (based on the attribute chosen),
properly fitted attribute-based standards provide little, if any,
incentive to build smaller vehicles simply to meet a fleet-wide
average, because the smaller vehicles will be subject to more stringent
compliance targets.\110\
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\109\ The 2002 NAS Report described at length and quantified the
potential safety problem with average fuel economy standards that
specify a single numerical requirement for the entire industry. See
2002 NAS Report at 5, finding 12. Ensuing analyses, including by
NHTSA, support the fundamental conclusion that standards structured
to minimize incentives to downsize all but the largest vehicles will
tend to produce better safety outcomes than flat standards.
\110\ Assuming that the attribute is related to vehicle size.
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Third, attribute-based standards provide a more equitable
regulatory framework for different vehicle manufacturers.\111\ A single
industry-wide average standard imposes disproportionate cost burdens
and compliance difficulties on the manufacturers that need to change
their product plans to meet the standards, and puts no obligation on
those manufacturers that have no need to change their plans. As
discussed above, attribute-based standards help to spread the
regulatory cost burden for fuel economy more broadly across all of the
vehicle manufacturers within the industry.
---------------------------------------------------------------------------
\111\ Id. at 4-5, finding 10.
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Fourth, attribute-based standards better respect economic
conditions and consumer choice, as compared to single-value standards.
A flat, or single value standard, encourages a certain vehicle size
fleet mix by creating incentives for manufacturers to use vehicle
downsizing as a compliance strategy. Under a footprint-based standard,
manufacturers are required to invest in technologies that improve the
fuel economy of the vehicles they sell rather than shifting the product
mix, because reducing the size of the vehicle is generally a less
viable compliance strategy given that smaller vehicles have more
stringent regulatory targets.
2. What attribute are the agencies proposing to use, and why?
As in the MYs 2012-2016 CAFE/GHG rules, and as NHTSA did in the MY
2011 CAFE rule, NHTSA and EPA are proposing to set CAFE and
CO2 standards that are based on vehicle footprint, which has
an observable correlation to fuel economy and emissions. There are
several policy and technical reasons why NHTSA and EPA believe that
footprint is the most appropriate attribute on which to base the
standards, even though some other vehicle attributes (notably curb
weight) are better correlated to fuel economy and emissions.
First, in the agencies' judgment, from the standpoint of vehicle
safety, it is important that the CAFE and CO2 standards be
set in a way that does not encourage manufacturers to respond by
selling vehicles that are in any way less safe. While NHTSA's research
of historical crash data also indicates that reductions in vehicle mass
that are accompanied by reductions in vehicle footprint tend to
compromise vehicle safety, footprint-based standards provide an
incentive to use advanced lightweight materials and structures that
would be discouraged by weight-based
[[Page 74913]]
standards, because manufacturers can use them to improve a vehicle's
fuel economy and CO2 emissions without their use necessarily
resulting in a change in the vehicle's fuel economy and emissions
targets.
Further, although we recognize that weight is better correlated
with fuel economy and CO2 emissions than is footprint, we
continue to believe that there is less risk of ``gaming'' (changing the
attribute(s) to achieve a more favorable target) by increasing
footprint under footprint-based standards than by increasing vehicle
mass under weight-based standards--it is relatively easy for a
manufacturer to add enough weight to a vehicle to decrease its
applicable fuel economy target a significant amount, as compared to
increasing vehicle footprint. We also continue to agree with concerns
raised in 2008 by some commenters on the MY 2011 CAFE rulemaking that
there would be greater potential for gaming under multi-attribute
standards, such as those that also depend on weight, torque, power,
towing capability, and/or off-road capability. The agencies agree with
the assessment first presented in NHTSA's MY 2011 CAFE final rule \112\
that the possibility of gaming is lowest with footprint-based
standards, as opposed to weight-based or multi-attribute-based
standards. Specifically, standards that incorporate weight, torque,
power, towing capability, and/or off-road capability in addition to
footprint would not only be more complex, but by providing degrees of
freedom with respect to more easily-adjusted attributes, they could
make it less certain that the future fleet would actually achieve the
average fuel economy and CO2 reduction levels projected by
the agencies.
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\112\ See 74 FR at 14359 (Mar. 30, 2009).
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The agencies recognize that based on economic and consumer demand
factors that are external to this rule, the distribution of footprints
in the future may be different (either smaller or larger) than what is
projected in this rule. However, the agencies continue to believe that
there will not be significant shifts in this distribution as a direct
consequence of this proposed rule. The agencies also recognize that
some international attribute-based standards use attributes other than
footprint and that there could be benefits for a number of
manufacturers if there was greater international harmonization of fuel
economy and GHG standards for light-duty vehicles, but this is largely
a question of how stringent standards are and how they are tested and
enforced. It is entirely possible that footprint-based and weight-based
systems can coexist internationally and not present an undue burden for
manufacturers if they are carefully crafted. Different countries or
regions may find different attributes appropriate for basing standards,
depending on the particular challenges they face--from fuel prices, to
family size and land use, to safety concerns, to fleet composition and
consumer preference, to other environmental challenges besides climate
change. The agencies anticipate working more closely with other
countries and regions in the future to consider how to address these
issues in a way that least burdens manufacturers while respecting each
country's need to meet its own particular challenges.
The agencies continue to find that footprint is the most
appropriate attribute upon which to base the proposed standards, but
recognizing strong public interest in this issue, we seek comment on
whether the agencies should consider setting standards for the final
rule based on another attribute or another combination of attributes.
If commenters suggest that the agencies should consider another
attribute or another combination of attributes, the agencies
specifically request that the commenters address the concerns raised in
the paragraphs above regarding the use of other attributes, and explain
how standards should be developed using the other attribute(s) in a way
that contributes more to fuel savings and CO2 reductions
than the footprint-based standards, without compromising safety.
3. What mathematical functions have the agencies previously used, and
why?
a. NHTSA in MY 2008 and MY 2011 CAFE (constrained logistic)
For the MY 2011 CAFE rule, NHTSA estimated fuel economy levels
after normalization for differences in technology, but did not make
adjustments to reflect other vehicle attributes (e.g., power-to-weight
ratios).\113\ Starting with the technology adjusted passenger car and
light truck fleets, NHTSA used minimum absolute deviation (MAD)
regression without sales weighting to fit a logistic form as a starting
point to develop mathematical functions defining the standards. NHTSA
then identified footprints at which to apply minimum and maximum values
(rather than letting the standards extend without limit) and transposed
these functions vertically (i.e., on a gpm basis, uniformly downward)
to produce the promulgated standards. In the preceding rule, for MYs
2008-2011 light truck standards, NHTSA examined a range of potential
functional forms, and concluded that, compared to other considered
forms, the constrained logistic form provided the expected and
appropriate trend (decreasing fuel economy as footprint increases), but
avoided creating ``kinks'' the agency was concerned would provide
distortionary incentives for vehicles with neighboring footprints.\114\
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\113\ See 74 FR 14196, 14363-14370 (Mar. 30, 2009) for NHTSA
discussion of curve fitting in the MY 2011 CAFE final rule.
\114\ See 71 FR 17556, 17609-17613 (Apr. 6, 2006) for NHTSA
discussion of ``kinks'' in the MYs 2008-2011 light truck CAFE final
rule (there described as ``edge effects''). A ``kink,'' as used
here, is a portion of the curve where a small change in footprint
results in a disproportionally large change in stringency.
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b. MYs 2012-2016 Light Duty GHG/CAFE (constrained/piecewise linear)
For the MYs 2012-2016 rules, NHTSA and EPA re-evaluated potential
methods for specifying mathematical functions to define fuel economy
and GHG standards. The agencies concluded that the constrained logistic
form, if applied to post-MY 2011 standards, would likely contain a
steep mid-section that would provide undue incentive to increase the
footprint of midsize passenger cars.\115\ The agencies judged that a
range of methods to fit the curves would be reasonable, and used a
minimum absolute deviation (MAD) regression without sales weighting on
a technology-adjusted car and light truck fleet to fit a linear
equation. This equation was used as a starting point to develop
mathematical functions defining the standards as discussed above. The
agencies then identified footprints at which to apply minimum and
maximum values (rather than letting the standards extend without limit)
and transposed these constrained/piecewise linear functions vertically
(i.e., on a gpm or CO2 basis, uniformly downward) to produce
the fleetwide fuel economy and CO2 emission levels for cars
and light trucks described in the final rule.\116\
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\115\ 75 FR at 25362.
\116\ See generally 74 FR at 49491-96; 75 FR at 25357-62.
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4. How have the agencies changed the mathematical functions for the
proposed MYs 2017-2025 standards, and why?
By requiring NHTSA to set CAFE standards that are attribute-based
and defined by a mathematical function, Congress appears to have wanted
the post-EISA standards to be data-driven--a mathematical function
defining the standards, in order to be ``attribute-based,'' should
reflect the observed relationship in the data between the
[[Page 74914]]
attribute chosen and fuel economy.\117\ EPA is also proposing to set
attribute-based CO2 standards defined by similar
mathematical functions, for the reasonable technical and policy grounds
discussed below and in section II of the preamble to the proposed rule,
and which supports a harmonization with the CAFE standards.
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\117\ A mathematical function can be defined, of course, that
has nothing to do with the relationship between fuel economy and the
chosen attribute--the most basic example is an industry-wide
standard defined as the mathematical function average required fuel
economy = X, where X is the single mpg level set by the agency. Yet
a standard that is simply defined as a mathematical function that is
not tied to the attribute(s) would not meet the requirement of EISA.
---------------------------------------------------------------------------
The relationship between fuel economy (and GHG emissions) and
footprint, though directionally clear (i.e., fuel economy tends to
decrease and CO2 emissions tend to increase with increasing
footprint), is theoretically vague and quantitatively uncertain; in
other words, not so precise as to a priori yield only a single possible
curve.\118\ There is thus a range of legitimate options open to the
agencies in developing curve shapes. The agencies may of course
consider statutory objectives in choosing among the many reasonable
alternatives. For example, curve shapes that might have some
theoretical basis could lead to perverse outcomes contrary to the
intent of the statutes to conserve energy and protect human health and
the environment.\119\ Thus, the decision of how to set the target
curves cannot always be just about most ``clearly'' using a
mathematical function to define the relationship between fuel economy
and the attribute; it often has to have a normative aspect, where the
agencies adjust the function that would define the relationship in
order to avoid perverse results, improve equity of burden across
manufacturers, preserve consumer choice, etc. This is true both for the
decisions that guide the mathematical function defining the sloped
portion of the target curves, and for the separate decisions that guide
the agencies' choice of ``cutpoints'' (if any) that define the fuel
economy/CO2 levels and footprints at each end of the curves
where the curves become flat. Data informs these decisions, but how the
agencies define and interpret the relevant data, and then the choice of
methodology for fitting a curve to the data, must include a
consideration of both technical data and policy goals.
---------------------------------------------------------------------------
\118\ In fact, numerous manufacturers have confidentially shared
with the agencies what they describe as ``physics based'' curves,
with each OEM showing significantly different shapes, and footprint
relationships. The sheer variety of curves shown to the agencies
further confirm the lack of an underlying principle of ``fundamental
physics'' driving the relationship between CO2 emission
or fuel consumption and footprint, and the lack of an underlying
principle to dictate any outcome of the agencies' establishment of
footprint-based standards.
\119\ For example, if the agencies set weight-based standards
defined by a steep function, the standards might encourage
manufacturers to keep adding weight to their vehicles to obtain less
stringent targets.
---------------------------------------------------------------------------
The next sections examine the policy concerns that the agencies
considered in developing the proposed target curves that define the
proposed MYs 2017-2025 CAFE and CO2 standards, new technical
work (expanding on similar analyses performed by NHTSA when the agency
proposed MY 2011-2015 standards, and by both agencies during
consideration of options for MY 2012-2016 CAFE and GHG standards) that
was completed in the process of reexamining potential mathematical
functions, how the agencies have defined the data, and how the agencies
explored statistical curve-fitting methodologies in order to arrive at
proposed curves.
5. What are the agencies proposing for the MYs 2017-2025 curves?
The proposed mathematical functions for the proposed MYs 2017-2025
standards are somewhat changed from the functions for the MYs 2012-2016
standards, in response to comments received from stakeholders and in
order to address technical concerns and policy goals that the agencies
judge more significant in this 9-year rulemaking than in the prior one,
which only included 5 years. This section discusses the methodology the
agencies selected as, at this time, best addressing those technical
concerns and policy goals, given the various technical inputs to the
agencies' current analyses. Below the agencies discuss how the agencies
determined the cutpoints and the flat portions of the MYs 2017-2025
target curves. We also note that both of these sections address only
how the target curves were fit to fuel consumption and CO2
emission values determined using the city and highway test procedures,
and that in determining respective regulatory alternatives, the
agencies made further adjustments to the resultant curves in order to
account for adjustments for improvements to mobile air conditioners.
Thus, recognizing that there are many reasonable statistical
methods for fitting curves to data points that define vehicles in terms
of footprint and fuel economy, the agencies have chosen for this
proposed rule to fit curves using an ordinary least-squares
formulation, on sales-weighted data, using a fleet that has had
technology applied, and after adjusting the data for the effects of
weight-to-footprint, as described below. This represents a departure
from the statistical approach for fitting the curves in MYs 2012-2016,
as explained in the next section. The agencies considered a wide
variety of reasonable statistical methods in order to better understand
the range of uncertainty regarding the relationship between fuel
consumption (the inverse of fuel economy), CO2 emission
rates, and footprint, thereby providing a range within which decisions
about standards would be potentially supportable.
a. What concerns were the agencies looking to address that led them to
change from the approach used for the MYs 2012-2016 curves?
During the year and a half since the MYs 2012-2016 final rule was
issued, NHTSA and EPA have received a number of comments from
stakeholders on how curves should be fitted to the passenger car and
light truck fleets. Some limited-line manufacturers have argued that
curves should generally be flatter in order to avoid discouraging small
vehicles, because steeper curves tend to result in more stringent
targets for smaller vehicles. Most full-line manufacturers have argued
that a passenger car curve similar in slope to the MY 2016 passenger
car curve would be appropriate for future model years, but that the
light truck curve should be revised to be less difficult for
manufacturers selling the largest full-size pickup trucks. These
manufacturers argued that the MY 2016 light truck curve was not
``physics-based,'' and that in order for future tightening of standards
to be feasible for full-line manufacturers, the truck curve for later
model years should be steeper and extended further (i.e., made less
stringent) into the larger footprints. The agencies do not agree that
the MY 2016 light truck curve was somehow deficient in lacking a
``physics basis,'' or that it was somehow overly stringent for
manufacturers selling large pickups--manufacturers making these
arguments presented no ``physics-based'' model to explain how fuel
economy should depend on footprint.\120\ The same manufacturers
indicated that they believed that the light truck standard should be
somewhat steeper after MY 2016, primarily because, after more than ten
years of progressive increases in the stringency of applicable CAFE
standards, large pickups would be less capable of achieving further
[[Page 74915]]
improvements without compromising load carrying and towing capacity.
---------------------------------------------------------------------------
\120\ See footnote 118.
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In developing the curve shapes for this proposed rule, the agencies
were aware of the current and prior technical concerns raised by OEMs
concerning the effects of the stringency on individual manufacturers
and their ability to meet the standards with available technologies,
while producing vehicles at a cost that allowed them to recover the
additional costs of the technologies being applied. Although we
continue to believe that the methodology for fitting curves for the
MY2012-2016 standards was technically sound, we recognize
manufacturers' technical concerns regarding their abilities to comply
with a similarly shallow curve after MY2016 given the anticipated mix
of light trucks in MYs 2017-2025. As in the MYs 2012-2016 rules, the
agencies considered these concerns in the analysis of potential curve
shapes. The agencies also considered safety concerns which could be
raised by curve shapes creating an incentive for vehicle downsizing, as
well as the potential loss to consumer welfare should vehicle upsizing
be unduly disincentivized. In addition, the agencies sought to improve
the balance of compliance burdens among manufacturers. Among the
technical concerns and resultant policy trade-offs the agencies
considered were the following:
Flatter standards (i.e., curves) increase the risk that
both the weight and size of vehicles will be reduced, compromising
highway safety.
Flatter standards potentially impact the utility of
vehicles by providing an incentive for vehicle downsizing.
Steeper footprint-based standards may incentivize vehicle
upsizing, thus increasing the risk that fuel economy and greenhouse gas
reduction benefits will be less than expected.
Given the same industry-wide average required fuel economy
or CO2 standard, flatter standards tend to place greater
compliance burdens on full-line manufacturers.
Given the same industry-wide average required fuel economy
or CO2 standard, steeper standards tend to place greater
compliance burdens on limited-line manufacturers (depending of course,
on which vehicles are being produced).
If cutpoints are adopted, given the same industry-wide
average required fuel economy, moving small-vehicle cutpoints to the
left (i.e., up in terms of fuel economy, down in terms of
CO2 emissions) discourages the introduction of small
vehicles, and reduces the incentive to downsize small vehicles in ways
that would compromise highway safety.
If cutpoints are adopted, given the same industry-wide
average required fuel economy, moving large-vehicle cutpoints to the
right (i.e., down in terms of fuel economy, up in terms of
CO2 emissions) better accommodates the unique design
requirements of larger vehicles--especially large pickups--and extends
the size range over which downsizing is discouraged.
All of these were policy goals that required trade-offs, and in
determining the curves they also required balance against the comments
from the OEMs discussed in the introduction to this section.
Ultimately, the agencies do not agree that the MY 2017 target curves
for this proposal, on a relative basis, should be made significantly
flatter than the MY 2016 curve,\121\ as we believe that this would undo
some of the safety-related incentives and balancing of compliance
burdens among manufacturers--effects that attribute-based standards are
intended to provide.
---------------------------------------------------------------------------
\121\ While ``significantly'' flatter is subjective, the year
over year change in curve shapes is discussed in greater detail in
Section 0 and Chapter 2 of the joint TSD.
---------------------------------------------------------------------------
Nonetheless, the agencies recognize full-line OEM concerns and have
tentatively concluded that further increases in the stringency of the
light truck standards will be more feasible if the light truck curve is
made steeper than the MY 2016 truck curve and the right (large
footprint) cut-point is extended over time to larger footprints. This
conclusion is supported by the agencies' technical analyses of
regulatory alternatives defined using the curves developed in the
manner described below.
b. What methodologies and data did the agencies consider in developing
the 2017-2025 curves?
In considering how to address the various policy concerns discussed
in the previous sections, the agencies revisited the data and performed
a number of analyses using different combinations of the various
statistical methods, weighting schemes, adjustments to the data and the
addition of technologies to make the fleets less technologically
heterogeneous. As discussed above, in the agencies' judgment, there is
no single ``correct'' way to estimate the relationship between
CO2 or fuel consumption and footprint--rather, each
statistical result is based on the underlying assumptions about the
particular functional form, weightings and error structures embodied in
the representational approach. These assumptions are the subject of the
following discussion. This process of performing many analyses using
combinations of statistical methods generates many possible outcomes,
each embodying different potentially reasonable combinations of
assumptions and each thus reflective of the data as viewed through a
particular lens. The choice of a standard developed by a given
combination of these statistical methods is consequently a decision
based upon the agencies' determination of how, given the policy
objectives for this rulemaking and the agencies' MY 2008-based forecast
of the market through MY 2025, to appropriately reflect the current
understanding of the evolution of automotive technology and costs, the
future prospects for the vehicle market, and thereby establish curves
(i.e., standards) for cars and light trucks.
c. What information did the agencies use to estimate a relationship
between fuel economy, CO2 and footprint?
For each fleet, the agencies began with the MY 2008-based market
forecast developed to support this proposal (i.e., the baseline fleet),
with vehicles' fuel economy levels and technological characteristics at
MY 2008 levels.\122\ The development, scope, and content of this market
forecast is discussed in detail in Chapter 1 of the joint Technical
Support Document supporting this rulemaking.
---------------------------------------------------------------------------
\122\ While the agencies jointly conducted this analysis, the
coefficients ultimately used in the slope setting analysis are from
the CAFE model.
---------------------------------------------------------------------------
d. What adjustments did the agencies evaluate?
The agencies believe one possible approach is to fit curves to the
minimally adjusted data shown above (the approach still includes sales
mix adjustments, which influence results of sales-weighted
regressions), much as DOT did when it first began evaluating potential
attribute-based standards in 2003.\123\ However, the agencies have
found, as in prior rulemakings, that the data are so widely spread
(i.e., when graphed, they fall in a loose ``cloud'' rather than tightly
around an obvious line) that they indicate a relationship between
footprint and CO2 and fuel consumption that is real but not
particularly strong. Therefore, as discussed below, the agencies also
explored possible adjustments that could help to explain and/or reduce
the ambiguity of this relationship, or could help to produce policy
outcomes the agencies judged to be more desirable.
---------------------------------------------------------------------------
\123\ 68 FR 74920-74926.
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[[Page 74916]]
i. Adjustment to reflect differences in technology
As in prior rulemakings, the agencies consider technology
differences between vehicle models to be a significant factor producing
uncertainty regarding the relationship between CO2/fuel
consumption and footprint. Noting that attribute-based standards are
intended to encourage the application of additional technology to
improve fuel efficiency and reduce CO2 emissions, the
agencies, in addition to considering approaches based on the unadjusted
engineering characteristics of MY 2008 vehicle models, therefore also
considered approaches in which, as for previous rulemakings, technology
is added to vehicles for purposes of the curve fitting analysis in
order to produce fleets that are less varied in technology content.
The agencies adjusted the baseline fleet for technology by adding
all technologies considered, except for the most advanced high-BMEP
(brake mean effective pressure) gasoline engines, diesel engines,
strong HEVs, PHEVs, EVs, and FCVs. The agencies included 15 percent
mass reduction on all vehicles.
ii. Adjustments reflecting differences in performance and ``density''
For the reasons discussed above regarding revisiting the shapes of
the curves, the agencies considered adjustments for other differences
between vehicle models (i.e., inflating or deflating the fuel economy
of each vehicle model based on the extent to which one of the vehicle's
attributes, such as power, is higher or lower than average).
Previously, NHTSA had rejected such adjustments because they imply that
a multi-attribute standard may be necessary, and the agencies judged
multi-attribute standard to be more subject to gaming than a footprint-
only standard.124 125 Having considered this issue again for
purposes of this rulemaking, NHTSA and EPA conclude the need to
accommodate in the target curves the challenges faced by manufacturers
of large pickups currently outweighs these prior concerns. Therefore,
the agencies also evaluated curve fitting approaches through which fuel
consumption and CO2 levels were adjusted with respect to
weight-to-footprint alone, and in combination with power-to-weight.
While the agencies examined these adjustments for purposes of fitting
curves, the agencies are not proposing a multi-attribute standard; the
proposed fuel economy and CO2 targets for each vehicle are
still functions of footprint alone. No adjustment would be used in the
compliance process.
---------------------------------------------------------------------------
\124\ For example, in comments on NHTSA's 2008 NPRM regarding MY
2011-2015 CAFE standards, Porsche recommended that standards be
defined in terms of a ``Summed Weighted Attribute'', wherein the
fuel economy target would calculated as follows: target = f(SWA),
where target is the fuel economy target applicable to a given
vehicle model and SWA = footprint + torque 1/1.5 + weight
1/2.5. (NHTSA-2008-0089-0174). While the standards the
agencies are proposing for MY 2017-2025 are not multi-attributes,
that is the target is only a function of footprint, we are proposing
curve shapes that were developed considering more than one
attribute.
\125\ 74 FR 14359.
---------------------------------------------------------------------------
The agencies also examined some differences between the technology-
adjusted car and truck fleets in order to better understand the
relationship between footprint and CO2/fuel consumption in
the agencies' MY 2008 based forecast. The agencies investigated the
relationship between HP/WT and footprint in the agencies' MY2008-based
market forecast. On a sales weighted basis, cars tend to become
proportionally more powerful as they get larger. In contrast, there is
a minimally positive relationship between HP/WT and footprint for light
trucks, indicating that light trucks become only slightly more powerful
as they get larger.
This analysis, presented in chapter 2.4.1.2 of the agencies' joint
TSD, indicated that vehicle performance (power-to-weight ratio) and
``density'' (curb weight divided by footprint) are both correlated to
fuel consumption (and CO2 emission rate), and that these
vehicle attributes are also both related to vehicle footprint. Based on
these relationships, the agencies explored adjusting the fuel economy
and CO2 emission rates of individual vehicle models based on
deviations from ``expected'' performance or weight/footprint at a given
footprint; the agencies inflated fuel economy levels of vehicle models
with higher performance and/or weight/footprint than the average of the
fleet would indicate at that footprint, and deflated fuel economy
levels with lower performance and/or weight. Previously, NHTSA had
rejected such adjustments because they imply that a multi-attribute
standard may be necessary, and the agency judged multi-attribute
standard to be more subject to gaming than a footprint-only
standard.126 127 While the agencies considered this
technique for purposes of fitting curves, the agencies are not
proposing a multi-attribute standard, as the proposed fuel economy and
CO2 targets for each vehicle are still functions of
footprint alone. No adjustment would be used in the compliance process.
---------------------------------------------------------------------------
\126\ For example, in comments on NHTSA's 2008 NPRM regarding MY
2011-2015 CAFE standards, Porsche recommended that standards be
defined in terms of a ``Summed Weighted Attribute'', wherein the
fuel economy target would calculated as follows: target = f(SWA),
where target is the fuel economy target applicable to a given
vehicle model and SWA = footprint + torque 1/1.5 + weight
1/2.5. (NHTSA-2008-0089-0174). While the standards the
agencies are proposing for MY 2017-2025 are not multi-attribute
standards, that is the target is only a function of footprint, we
are proposing curve shapes that were developed considering more than
one attribute.
\127\ 74 FR 14359.
---------------------------------------------------------------------------
The agencies seek comment on the appropriateness of the adjustments
as described in Chapter 2 of the joint TSD, particularly regarding
whether these adjustments suggest that standards should be defined in
terms of other attributes in addition to footprint, and whether they
may encourage changes other than encouraging the application of
technology to improve fuel economy and reduce CO2 emissions.
The agencies also seek comment regarding whether these adjustments
effectively ``lock in'' through MY 2025 relationships that were
observed in MY 2008.
e. What statistical methods did the agencies evaluate?
The above approaches resulted in three data sets each for (a)
vehicles without added technology and (b) vehicles with technology
added to reduce technology differences, any of which may provide a
reasonable basis for fitting mathematical functions upon which to base
the slope of the standard curves: (1) Vehicles without any further
adjustments; (2) vehicles with adjustments reflecting differences in
``density'' (weight/footprint); and (3) vehicles with adjustments
reflecting differences in ``density,'' and adjustments reflecting
differences in performance (power/weight). Using these data sets, the
agencies tested a range of regression methodologies, each judged to be
possibly reasonable for application to at least some of these data
sets.
i. Regression Approach
In the MYs 2012-2016 final rules, the agencies employed a robust
regression approach (minimum absolute deviation, or MAD), rather than
an ordinary least squares (OLS) regression.\128\ MAD is generally
applied to mitigate the effect of outliers in a dataset, and thus was
employed in that rulemaking as part of our interest in attempting to
best represent the underlying technology. NHTSA had used OLS in early
development of attribute-based CAFE
[[Page 74917]]
standards, but NHTSA (and then NHTSA and EPA) subsequently chose MAD
instead of OLS for both the MY 2011 and the MYs 2012-2016 rulemakings.
These decisions on regression technique were made both because OLS
gives additional emphasis to outliers \129\ and because the MAD
approach helped achieve the agencies' policy goals with regard to curve
slope in those rulemakings.\130\ In the interest of taking a fresh look
at appropriate regression methodologies as promised in the 2012-2016
light duty rulemaking, in developing this proposal, the agencies gave
full consideration to both OLS and MAD. The OLS representation, as
described, uses squared errors, while MAD employs absolute errors and
thus weights outliers less.
---------------------------------------------------------------------------
\128\ See 75 FR at 25359.
\129\ Id. at 25362-63.
\130\ Id. at 25363.
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As noted, one of the reasons stated for choosing MAD over least
square regression in the MYs 2012-2016 rulemaking was that MAD reduced
the weight placed on outliers in the data. However, the agencies have
further considered whether it is appropriate to classify these vehicles
as outliers. Unlike in traditional datasets, these vehicles'
performance is not mischaracterized due to errors in their measurement,
a common reason for outlier classification. Being certification data,
the chances of large measurement errors should be near zero,
particularly towards high CO2 or fuel consumption. Thus,
they can only be outliers in the sense that the vehicle designs are
unlike those of other vehicles. These outlier vehicles may include
performance vehicles, vehicles with high ground clearance, 4WD, or boxy
designs. Given that these are equally legitimate on-road vehicle
designs, the agencies concluded that it would appropriate to reconsider
the treatment of these vehicles in the regression techniques.
Based on these considerations as well as the adjustments discussed
above, the agencies concluded it was not meaningful to run MAD
regressions on gpm data that had already been adjusted in the manner
described above. Normalizing already reduced the variation in the data,
and brought outliers towards average values. This was the intended
effect, so the agencies deemed it unnecessary to apply an additional
remedy to resolve an issue that had already been addressed, but we seek
comment on the use of robust regression techniques under such
circumstances.
ii. Sales Weighting
Likewise, the agencies reconsidered employing sales-weighting to
represent the data. As explained below, the decision to sales weight or
not is ultimately based upon a choice about how to represent the data,
and not by an underlying statistical concern. Sales weighting is used
if the decision is made to treat each (mass produced) unit sold as a
unique physical observation. Doing so thereby changes the extent to
which different vehicle model types are emphasized as compared to a
non-sales weighted regression. For example, while total General Motors
Silverado (332,000) and Ford F-150 (322,000) sales differ by less than
10,000 in MY 2021 market forecast, 62 F-150s models and 38 Silverado
models are reported in the agencies baselines. Without sales-weighting,
the F-150 models, because there are more of them, are given 63 percent
more weight in the regression despite comprising a similar portion of
the marketplace and a relatively homogenous set of vehicle
technologies.
The agencies did not use sales weighting in the 2012-2016
rulemaking analysis of the curve shapes. A decision to not perform
sales weighting reflects judgment that each vehicle model provides an
equal amount of information concerning the underlying relationship
between footprint and fuel economy. Sales-weighted regression gives the
highest sales vehicle model types vastly more emphasis than the lowest-
sales vehicle model types thus driving the regression toward the sales-
weighted fleet norm. For unweighted regression, vehicle sales do not
matter. The agencies note that the light truck market forecast shows MY
2025 sales of 218,000 units for Toyota's 2WD Sienna, and shows 66 model
configurations with MY 2025 sales of fewer than 100 units. Similarly,
the agencies' market forecast shows MY 2025 sales of 267,000 for the
Toyota Prius, and shows 40 model configurations with MY2025 sales of
fewer than 100 units. Sales-weighted analysis would give the Toyota
Sienna and Prius more than a thousand times the consideration of many
vehicle model configurations. Sales-weighted analysis would, therefore,
cause a large number of vehicle model configurations to be virtually
ignored in the regressions.\131\
---------------------------------------------------------------------------
\131\ 75 FR at 25362 and n. 64.
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However, the agencies did note in the MYs 2012-2016 final rules
that, ``sales weighted regression would allow the difference between
other vehicle attributes to be reflected in the analysis, and also
would reflect consumer demand.'' \132\ In reexamining the sales-
weighting for this analysis, the agencies note that there are low-
volume model types account for many of the passenger car model types
(50 percent of passenger car model types account for 3.3 percent of
sales), and it is unclear whether the engineering characteristics of
these model types should equally determine the standard for the
remainder of the market.
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\132\ 75 FR at 25632/3.
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In the interest of taking a fresh look at appropriate methodologies
as promised in the last final rule, in developing this proposal, the
agencies gave full consideration to both sales-weighted and unweighted
regressions.
iii. Analyses Performed
We performed regressions describing the relationship between a
vehicle's CO2/fuel consumption and its footprint, in terms
of various combinations of factors: initial (raw) fleets with no
technology, versus after technology is applied; sales-weighted versus
non-sales weighted; and with and without two sets of normalizing
factors applied to the observations. The agencies excluded diesels and
dedicated AFVs because the agencies anticipate that advanced gasoline-
fueled vehicles are likely to be dominant through MY 2025, based both
on our own assessment of potential standards (see Sections III and IV
below) as well as our discussions with large number of automotive
companies and suppliers.
Thus, the basic OLS regression on the initial data (with no
technology applied) and no sales-weighting represents one perspective
on the relation between footprint and fuel economy. Adding sales
weighting changes the interpretation to include the influence of sales
volumes, and thus steps away from representing vehicle technology
alone. Likewise, MAD is an attempt to reduce the impact of outliers,
but reducing the impact of outliers might perhaps be less
representative of technical relationships between the variables,
although that relationship may change over time in reality. Each
combination of methods and data reflects a perspective, and the
regression results simply reflect that perspective in a simple
quantifiable manner, expressed as the coefficients determining the line
through the average (for OLS) or the median (for MAD) of the data. It
is left to policy makers to determine an appropriate perspective and to
interpret the consequences of the various alternatives.
We invite comments on the application of the weights as described
[[Page 74918]]
above, and the implications for interpreting the relationship between
fuel efficiency (or CO2) and footprint.
f. What results did the agencies obtain, which methodology did the
agencies choose for this proposal, and why is it reasonable?
Both agencies analyzed the same statistical approaches. For
regressions against data including technology normalization, NHTSA used
the CAFE modeling system, and EPA used EPA's OMEGA model. The agencies
obtained similar regression results, and have based today's joint
proposal on those obtained by NHTSA. The draft Joint TSD Chapter 2
contains a large set of illustrative of figures which show the range of
curves determined by the possible combinations of regression technique,
with and without sales weighting, with and without the application of
technology, and with various adjustments to the gpm variable prior to
running a regression.
The choice among the alternatives presented in the draft Joint TSD
Chapter 2 was to use the OLS formulation, on sales-weighted data, using
a fleet that has had technology applied, and after adjusting the data
for the effect of weight-to-footprint, as described above. The agencies
believe that this represents a technically reasonable approach for
purposes of developing target curves to define the proposed standards,
and that it represents a reasonable trade-off among various
considerations balancing statistical, technical, and policy matters,
which include the statistical representativeness of the curves
considered and the steepness of the curve chosen. The agencies judge
the application of technology prior to curve fitting to provide a
reasonable means--one consistent with the rule's objective of
encouraging manufacturers to add technology in order to increase fuel
economy--of reducing variation in the data and thereby helping to
estimate a relationship between fuel consumption/CO2 and
footprint.
Similarly, for the agencies' current MY 2008-based market-forecast
and the agencies' current estimates of future technology effectiveness,
the inclusion of the weight-to-footprint data adjustment prior to
running the regression also helps to improve the fit of the curves by
reducing the variation in the data, and the agencies believe that the
benefits of this adjustment for this proposed rule likely outweigh the
potential that resultant curves might somehow encourage reduced load
carrying capability or vehicle performance (note that the we are not
suggesting that we believe these adjustments will reduce load carrying
capability or vehicle performance). In addition to reducing the
variability, the truck curve is also steepened, and the car curve
flattened compared to curves fitted to sales weighted data that do not
include these normalizations. The agencies agree with manufacturers of
full-size pick-up trucks that in order to maintain towing and hauling
utility, the engines on pick-up trucks must be more powerful, than
their low ``density'' nature would statistically suggest based on the
agencies' current MY2008-based market forecast and the agencies'
current estimates of the effectiveness of different fuel-saving
technologies. Therefore, it may be more equitable (i.e., in terms of
relative compliance challenges faced by different light truck
manufacturers) to adjust the slope of the curve defining fuel economy
and CO2 targets.
As described above, however, other approaches are also technically
reasonable, and also represent a way of expressing the underlying
relationships. The agencies plan to revisit the analysis for the final
rule, after updating the underlying market forecast and estimates of
technology effectiveness, and based on relevant public comments
received. In addition, the agencies intend to update the technology
cost estimates, which could alter the NPRM analysis results and
consequently alter the balance of the trade-offs being weighed to
determine the final curves.
g. Implications of the proposed slope compared to MY 2012-2016
The proposed slope has several implications relative to the MY 2016
curves, with the majority of changes on the truck curve. With the
agencies' current MY2008-based market forecast and the agencies'
current estimates of technology effectiveness, the combination of sales
weighting and WT/FP normalization produced a car curve slope similar to
that finalized in the MY 2012-2016 final rulemaking (4.7 g/mile in MY
2016, vs. 4.5 g/mile proposed in MY 2017). By contrast, the truck curve
is steeper in MY 2017 than in MY 2016 (4.0 g/mile in MY 2016 vs. 4.9 g/
mile in MY 2017). As discussed previously, a steeper slope relaxes the
stringency of targets for larger vehicles relative to those for smaller
vehicles, thereby shifting relative compliance burdens among
manufacturers based on their respective product mix.
6. Once the agencies determined the appropriate slope for the sloped
part, how did the agencies determine the rest of the mathematical
function?
The agencies continue to believe that without a limit at the
smallest footprints, the function--whether logistic or linear--can
reach values that would be unfairly burdensome for a manufacturer that
elects to focus on the market for small vehicles; depending on the
underlying data, an unconstrained form could result in stringency
levels that are technologically infeasible and/or economically
impracticable for those manufacturers that may elect to focus on the
smallest vehicles. On the other side of the function, without a limit
at the largest footprints, the function may provide no floor on
required fuel economy. Also, the safety considerations that support the
provision of a disincentive for downsizing as a compliance strategy
apply weakly, if at all, to the very largest vehicles. Limiting the
function's value for the largest vehicles thus leads to a function with
an inherent absolute minimum level of performance, while remaining
consistent with safety considerations.
Just as for slope, in determining the appropriate footprint and
fuel economy values for the ``cutpoints,'' the places along the curve
where the sloped portion becomes flat, the agencies took a fresh look
for purposes of this proposal, taking into account the updated market
forecast and new assumptions about the availability of technologies.
The next two sections discuss the agencies' approach to cutpoints for
the passenger car and light truck curves separately, as the policy
considerations for each vary somewhat.
a. Cutpoints for PC curve
The passenger car fleet upon which the agencies have based the
target curves for MYs 2017-2025 is derived from MY 2008 data, as
discussed above. In MY 2008, passenger car footprints ranged from 36.7
square feet, the Lotus Exige 5, to 69.3 square feet, the Daimler
Maybach 62. In that fleet, several manufacturers offer small, sporty
coupes below 41 square feet, such as the BMW Z4 and Mini, Honda S2000,
Mazda MX-5 Miata, Porsche Carrera and 911, and Volkswagen New Beetle.
Because such vehicles represent a small portion (less than 10 percent)
of the passenger car market, yet often have performance, utility, and/
or structural characteristics that could make it technologically
infeasible and/or economically impracticable for manufacturers focusing
on such
[[Page 74919]]
vehicles to achieve the very challenging average requirements that
could apply in the absence of a constraint, EPA and NHTSA are again
proposing to cut off the sloped portion of the passenger car function
at 41 square feet, consistent with the MYs 2012-2016 rulemaking. The
agencies recognize that for manufacturers who make small vehicles in
this size range, putting the cutpoint at 41 square feet creates some
incentive to downsize (i.e., further reduce the size, and/or increase
the production of models currently smaller than 41 square feet) to make
it easier to meet the target. Putting the cutpoint here may also create
the incentive for manufacturers who do not currently offer such models
to do so in the future. However, at the same time, the agencies believe
that there is a limit to the market for cars smaller than 41 square
feet--most consumers likely have some minimum expectation about
interior volume, among other things. The agencies thus believe that the
number of consumers who will want vehicles smaller than 41 square feet
(regardless of how they are priced) is small, and that the incentive to
downsize to less than 41 square feet in response to this proposal, if
present, will be at best minimal. On the other hand, the agencies note
that some manufacturers are introducing mini cars not reflected in the
agencies MY 2008-based market forecast, such as the Fiat 500, to the
U.S. market, and that the footprint at which the curve is limited may
affect the incentive for manufacturers to do so.
Above 56 square feet, the only passenger car models present in the
MY 2008 fleet were four luxury vehicles with extremely low sales
volumes--the Bentley Arnage and three versions of the Rolls Royce
Phantom. As in the MYs 2012-2016 rulemaking, NHTSA and EPA therefore
are proposing again to cut off the sloped portion of the passenger car
function at 56 square feet.
While meeting with manufacturers prior to issuing the proposal, the
agencies received comments from some manufacturers that, combined with
slope and overall stringency, using 41 square feet as the footprint at
which to cap the target for small cars would result in unduly
challenging targets for small cars. The agencies do not agree. No
specific vehicle need meet its target (because standards apply to fleet
average performance), and maintaining a sloped function toward the
smaller end of the passenger car market is important to discourage
unsafe downsizing, the agencies are thus proposing to again ``cut off''
the passenger car curve at 41 square feet, notwithstanding these
comments.
The agencies seek comment on setting cutpoints for the MYs 2017-
2025 passenger car curves at 41 square feet and 56 square feet.
b. Cutpoints for LT curve
The light truck fleet upon which the agencies have based the target
curves for MYs 2017-2025, like the passenger car fleet, is derived from
MY 2008 data, as discussed in Section 2.4 above. In MY 2008, light
truck footprints ranged from 41.0 square feet, the Jeep Wrangler, to
77.5 square feet, the Toyota Tundra. For consistency with the curve for
passenger cars, the agencies are proposing to cut off the sloped
portion of the light truck function at the same footprint, 41 square
feet, although we recognize that no light trucks are currently offered
below 41 square feet. With regard to the upper cutpoint, the agencies
heard from a number of manufacturers during the discussions leading up
to this proposal that the location of the cutpoint in the MYs 2012-2016
rules, 66 square feet, meant that the same standard applied to all
light trucks with footprints of 66 square feet or greater, and that in
fact the targets for the largest light trucks in the later years of
that rulemaking were extremely challenging. Those manufacturers
requested that the agencies extend the cutpoint to a larger footprint,
to reduce targets for the largest light trucks which represent a
significant percentage of those manufacturers light truck sales. At the
same time, in re-examining the light truck fleet data, the agencies
concluded that aggregating pickup truck models in the MYs 2012-2016
rule had led the agencies to underestimate the impact of the different
pickup truck model configurations above 66 square feet on
manufacturers' fleet average fuel economy and CO2 levels (as
discussed immediately below). In disaggregating the pickup truck model
data, the impact of setting the cutpoint at 66 square feet after model
year 2016 became clearer to the agencies.
In the agencies' view, there is legitimate basis for these
comments. The agencies' market forecast includes about 24 vehicle
configurations above 74 square feet with a total volume of about 50,000
vehicles or less during any MY in the 2017-2025 time frame. While a
relatively small portion of the overall truck fleet, for some
manufacturers, these vehicles are non-trivial portion of sales. As
noted above, the very largest light trucks have significant load-
carrying and towing capabilities that make it particularly challenging
for manufacturers to add fuel economy-improving/CO2-reducing
technologies in a way that maintains the full functionality of those
capabilities.
Considering manufacturer CBI and our estimates of the impact of the
66 square foot cutpoint for future model years, the agencies have
initially determined to adopt curves that transition to a different cut
point. While noting that no specific vehicle need meet its target
(because standards apply to fleet average performance), we believe that
the information provided to us by manufacturers and our own analysis
supports the gradual extension of the cutpoint for large light trucks
in this proposal from 66 square feet in MY 2016 out to a larger
footprint square feet before MY 2025.
[[Page 74920]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.034
The agencies are proposing to phase in the higher cutpoint for the
truck curve in order to avoid any backsliding from the MY 2016
standard. A target that is feasible in one model year should never
become less feasible in a subsequent model year--manufacturers should
have no reason to remove fuel economy-improving/CO2-reducing
technology from a vehicle once it has been applied. Put another way,
the agencies are proposing to not allow ``curve crossing'' from one
model year to the next. In proposing MYs 2011-2015 CAFE standards and
promulgating MY 2011 standards, NHTSA proposed and requested comment on
avoiding curve crossing, as an ``anti-backsliding measure.'' \133\ The
MY 2016 2 cycle test curves are therefore a floor for the MYs 2017-2025
curves. For passenger cars, which have minimal change in slope from the
MY 2012-2016 rulemakings and no change in cut points, there are no
curve crossing issues in the proposed standards.
---------------------------------------------------------------------------
\133\ 74 Fed. Reg. at 14370 (Mar. 30, 2009).
---------------------------------------------------------------------------
The minimum stringency determination was done using the two cycle
curves. Stringency adjustments for air conditioning and other credits
were calculated after curves that did not cross were determined in two
cycle space. The year over year increase in these adjustments cause
neither the GHG nor CAFE curves (with A/C) to contact the 2016 curves
when charted.
7. Once the agencies determined the complete mathematical function
shape, how did the agencies adjust the curves to develop the proposed
standards and regulatory alternatives?
The curves discussed above all reflect the addition of technology
to individual vehicle models to reduce technology differences between
vehicle models before fitting curves. This application of technology
was conducted not to directly determine the proposed standards, but
rather for purposes of technology adjustments, and set aside
considerations regarding potential rates of application (i.e., phase-in
caps), and considerations regarding economic implications of applying
specific technologies to specific vehicle models. The following
sections describe further adjustments to the curves discussed above,
that affect both the shape of the curve, and the location of the curve,
that helped the agencies determine curves that defined the proposed
standards.
a. Adjusting for Year over Year Stringency
As in the MYs 2012-2016 rules, the agencies developed curves
defining regulatory alternatives for consideration by ``shifting''
these curves. For the MYs 2012-2016 rules, the agencies did so on an
absolute basis, offsetting the fitted curve by the same value (in gpm
or g/mi) at all footprints. In developing this proposal, the agencies
have reconsidered the use of this approach, and have concluded that
after MY 2016, curves should be offset on a relative basis--that is, by
adjusting the entire gpm-based curve (and, equivalently, the
CO2 curve) by the same percentage rather than the same
absolute value. The agencies' estimates of the effectiveness of these
technologies are all expressed in relative terms--that is, each
technology (with the exception of A/C) is estimated to reduce fuel
consumption (the inverse of fuel economy) and CO2 emissions
by a specific percentage of
[[Page 74921]]
fuel consumption without the technology. It is, therefore, more
consistent with the agencies' estimates of technology effectiveness to
develop the proposed standards and regulatory alternatives by applying
a proportional offset to curves expressing fuel consumption or
emissions as a function of footprint. In addition, extended
indefinitely (and without other compensating adjustments), an absolute
offset would eventually (i.e., at very high average stringencies)
produce negative (gpm or g/mi) targets. Relative offsets avoid this
potential outcome. Relative offsets do cause curves to become, on a
fuel consumption and CO2 basis, flatter at greater average
stringencies; however, as discussed above, this outcome remains
consistent with the agencies' estimates of technology effectiveness. In
other words, given a relative decrease in average required fuel
consumption or CO2 emissions, a curve that is flatter by the
same relative amount should be equally challenging in terms of the
potential to achieve compliance through the addition of fuel-saving
technology.
On this basis, and considering that the ``flattening'' occurs
gradually for the regulatory alternatives the agencies have evaluated,
the agencies tentatively conclude that this approach to offsetting the
curves to develop year-by-year regulatory alternatives neither re-
creates a situation in which manufacturers are likely to respond to
standards in ways that compromise highway safety, nor undoes the
attribute-based standard's more equitable balancing of compliance
burdens among disparate manufacturers. The agencies invite comment on
these conclusions, and on any other means that might avoid the
potential outcomes--in particular, negative fuel consumption and
CO2 targets--discussed above.
b. Adjusting for anticipated improvements to mobile air conditioning
systems
The fuel economy values in the agencies' market forecast are based
on the 2-cycle (i.e., city and highway) fuel economy test and
calculation procedures that do not reflect potential improvements in
air conditioning system efficiency, refrigerant leakage, or refrigerant
Global Warming Potential (GWP). Recognizing that there are significant
and cost effective potential air conditioning system improvements
available in the rulemaking timeframe (discussed in detail in Chapter 5
of the draft joint TSD), the agencies are increasing the stringency of
the target curves based on the agencies' assessment of the capability
of manufacturers to implement these changes. For the proposed CAFE
standards and alternatives, an offset is included based on air
conditioning system efficiency improvements, as these improvements are
the only improvements that effect vehicle fuel economy. For the
proposed GHG standards and alternatives, a stringency increase is
included based on air conditioning system efficiency, leakage and
refrigerant improvements. As discussed above in Chapter 5 of the join
TSD, the air conditioning system improvements affect a vehicle's fuel
efficiency or CO2 emissions performance as an additive
stringency increase, as compared to other fuel efficiency improving
technologies which are multiplicative. Therefore, in adjusting target
curves for improvements in the air conditioning system performance, the
agencies are adjusting the target curves by additive stringency
increases (or vertical shifts) in the curves.
For the GHG target curves, the offset for air conditioning system
performance is being handled in the same manner as for the MY 2012-2016
rules. For the CAFE target curves, NHTSA for the first time is
proposing to account for potential improvements in air conditioning
system performance. Using this methodology, the agencies first use a
multiplicative stringency adjustment for the sloped portion of the
curves to reflect the effectiveness on technologies other than air
conditioning system technologies, creating a series of curve shapes
that are ``fanned'' based on two-cycle performance. Then the curves are
offset vertically by the air conditioning improvement by an equal
amount at every point.
D. Joint Vehicle Technology Assumptions
For the past four to five years, the agencies have been working
together closely to follow the development of fuel consumption and GHG
reducing technologies. Two major analyses have been published jointly
by EPA and NHTSA: The Technical Support Document to support the MYs
2012-2016 final rule and the 2010 Technical Analysis Report (which
supported the 2010 Notice of Intent). The latter of these analyses was
also done in conjunction with CARB. Both of these analyses have both
been published within the past 18 months. As a result, much of the work
is still relevant and we continue to rely heavily on these references.
However, some technologies--and what we know about them--are changing
so rapidly that the analysis supporting this proposal contains a
considerable amount of new work on technologies included in this rule,
some of which were included in prior rulemakings, and others that were
not.
Notably, we have updated our battery costing methodology
significantly since the MYs 2012-2016 final rule and even relative to
the 2010 TAR. We are now using a peer reviewed model developed by
Argonne National Laboratory for the Department of Energy which provides
us with more rigorous estimates for battery costs and allows us to
estimate future costs specific to hybrids, plug-in hybrids and electric
vehicles all of which have different battery design characteristics.
We also have new cost data from more recently completed tear down
and other cost studies by FEV which were not available in either the
MYs 2012-2016 final rule or the 2010 TAR. These new studies analyzed a
8-speed automatic transmission replacing 6-speed automatic
transmission, a 8-speed dual clutch transmission replacing 6-speed dual
clutch transmission, a power-split hybrid powertrain with an I4 engine
replacing a conventional engine powertrain with V6 engine, a mild
hybrid with stop-start technology and an I4 engine replacing a
conventional I4 engine, and the Fiat Multi-Air engine technology. We
discuss the new tear down studies in Section II.D.2 of this preamble.
Based on this, we have updated some of the FEV-developed costs relative
to what we used in the 2012-2016 final rule, although these costs are
consistent with those used in the 2010 TAR. Furthermore, we have
completely re-worked our estimated costs associated with mass reduction
relative to both the MYs 2012-2016 final rule and the 2010 TAR.
As would be expected given that some of our cost estimates were
developed several years ago, we have also updated all of our base
direct manufacturing costs to put them in terms of more recent dollars
(2009 dollars for this proposal). We have also updated our methodology
for calculating indirect costs associated with new technologies since
both the MYs 2012-2016 final rule and the TAR. We continue to use the
indirect cost multiplier (ICM) approach used in those analyses, but
have made important changes to the calculation methodology--changes
done in response to ongoing staff evaluation and public input.
Lastly, we have updated many of the technologies' effectiveness
estimates largely based on new vehicle simulation work conducted by
Ricardo Engineering. This simulation work provides the effectiveness
estimates for
[[Page 74922]]
a number of the technologies most heavily relied on in the agencies'
analysis of potential standards for MYs 2017-2025.
The agencies have also reviewed the findings and recommendations in
the updated NAS report ``Assessment of Fuel Economy Technologies for
Light-Duty Vehicles'' that was completed after the MYs 2012-2016 final
rule was issued,\134\ and NHTSA has performed a sensitivity analysis
(contained in its PRIA) to examine the impact of using some of the NAS
cost and effectiveness estimates on the proposed standards.
---------------------------------------------------------------------------
\134\ ``Assessment of Fuel Economy Technologies for Light-Duty
Vehicles,'' National Research Council of the National Academies,
June 2010.
---------------------------------------------------------------------------
Each of these changes is discussed briefly in the remainder of this
section and in much greater detail in Chapter 3 of the draft joint TSD.
First we provide a brief summary of the technologies we have considered
in this proposal before highlighting the above-mentioned items that are
new for this proposal. We request comment on all aspects of our
analysis as discussed here and detailed in the draft joint TSD.
1. What technologies did the Agencies Consider?
For this proposal, the agencies project that manufacturers can add
a variety of technologies to each of their vehicle models and or
platforms in order to improve the vehicles' fuel economy and GHG
performance. In order to analyze a variety of regulatory alternative
scenarios, it is essential to have a thorough understanding of the
technologies available to the manufacturers. This analysis includes an
assessment of the cost, effectiveness, availability, development time,
and manufacturability of various technologies within the normal
redesign and refresh periods of a vehicle line (or in the design of a
new vehicle). As we describe in the draft Joint TSD, when a technology
can be applied can affect the cost as well as the technology
penetration rates (or phase-in caps) that are projected in the
analysis.
The agencies considered dozens of vehicle technologies that
manufacturers could use to improve the fuel economy and reduce
CO2 emissions of their vehicles during the MYs 2017-2025
timeframe. Many of the technologies considered are available today, are
well known, and could be incorporated into vehicles once product
development decisions are made. These are ``near-term'' technologies
and are identical or very similar to those anticipated in the agencies'
analyses of compliance strategies for the MYs 2012-2016 final rule. For
this rulemaking, given its time frame, other technologies are also
considered that are not currently in production, but that are beyond
the initial research phase, and are under development and expected to
be in production in the next 5-10 years. Examples of these technologies
are downsized and turbocharged engines operating at combustion
pressures even higher than today's turbocharged engines, and an
emerging hybrid architecture combined with an 8 speed dual clutch
transmission, a combination that is not available today. These are
technologies which the agencies believe can, for the most part, be
applied both to cars and trucks, and which are expected to achieve
significant improvements in fuel economy and reductions in
CO2 emissions at reasonable costs in the MYs 2017 to 2025
timeframe. The agencies did not consider technologies that are
currently in an initial stage of research because of the uncertainty
involved in the availability and feasibility of implementing these
technologies with significant penetration rates for this analysis. The
agencies recognize that due to the relatively long time frame between
the date of this proposal and 2025, it is very possible that new and
innovative technologies will make their way into the fleet, perhaps
even in significant numbers, that we have not considered in this
analysis. We expect to reconsider such technologies as part of the mid-
term evaluation, as appropriate, and possibly could be used to generate
credits under a number of the proposed flexibility and incentive
programs provided in the proposed rules.
The technologies considered can be grouped into four broad
categories: Engine technologies; transmission technologies; vehicle
technologies (such as mass reduction, tires and aerodynamic
treatments); and electrification technologies (including hybridization
and changing to full electric drive).\135\ The specific technologies
within each broad group are discussed below. The list of technologies
presented below is nearly identical to that presented in both the MYs
2012-2016 final rule and the 2010 TAR, with the following new
technologies added to the list since the last final rule: The P2
hybrid, a newly emerging hybridization technology that was also
considered in the 2010 TAR; continued improvements in gasoline engines,
with greater efficiencies and downsizing; continued significant
efficiency improvements in transmissions; and ongoing levels of
improvement to some of the seemingly more basic technologies such as
lower rolling resistance tires and aerodynamic treatments, which are
among the most cost effective technologies available for reducing fuel
consumption and GHGs. Not included in the list below are technologies
specific to air conditioning system improvements and off-cycle
controls, which are presented in Section II.F of this NPRM and in
Chapter 5 of the draft Joint TSD.
---------------------------------------------------------------------------
\135\ NHTSA's analysis considers these technologies in five
groups rather than four--hybridization is one category, and
``electrification/accessories'' is another.
---------------------------------------------------------------------------
a. Types of Engine Technologies Considered
Low-friction lubricants including low viscosity and advanced low
friction lubricant oils are now available with improved performance. If
manufacturers choose to make use of these lubricants, they may need to
make engine changes and conduct durability testing to accommodate the
lubricants. The costs in our analysis consider these engine changes and
testing requirements. This level of low friction lubricants is expected
to exceed 85 percent penetration by the 2017 MY.
Reduction of engine friction losses can be achieved through low-
tension piston rings, roller cam followers, improved material coatings,
more optimal thermal management, piston surface treatments, and other
improvements in the design of engine components and subsystems that
improve efficient engine operation. This level of engine friction
reduction is expected to exceed 85 percent penetration by the 2017 MY.
Advanced Low Friction Lubricant and Second Level of Engine Friction
Reduction are new for this analysis. As technologies advance between
now and the rulemaking timeframe, there will be further development in
low friction lubricants and engine friction reductions. The agencies
grouped the development in these two areas into a single technology and
applied them for MY 2017 and beyond.
Cylinder deactivation disables the intake and exhaust valves and
prevents fuel injection into some cylinders during light-load
operation. The engine runs temporarily as though it were a smaller
engine which substantially reduces pumping losses.
Variable valve timing alters the timing of the intake valves,
exhaust valves, or both, primarily to reduce pumping losses, increase
specific power, and control residual gases.
Discrete variable valve lift increases efficiency by optimizing air
flow over a broader range of engine operation which
[[Page 74923]]
reduces pumping losses. This is accomplished by controlled switching
between two or more cam profile lobe heights.
Continuous variable valve lift is an electromechanical or
electrohydraulic system in which valve timing is changed as lift height
is controlled. This yields a wide range of performance optimization and
volumetric efficiency, including enabling the engine to be valve
throttled.
Stoichiometric gasoline direct-injection technology injects fuel at
high pressure directly into the combustion chamber to improve cooling
of the air/fuel charge as well as combustion quality within the
cylinder, which allows for higher compression ratios and increased
thermodynamic efficiency.
Turbo charging and downsizing increases the available airflow and
specific power level, allowing a reduced engine size while maintaining
performance. Engines of this type use gasoline direct injection (GDI)
and dual cam phasing. This reduces pumping losses at lighter loads in
comparison to a larger engine. We continue to include an 18 bar brake
mean effective pressure (BMEP) technology (as in the MYs 2012-2016
final rule) and are also including both 24 bar BMEP and 27 bar BMEP
technologies. The 24 bar BMEP technology would use a single-stage,
variable geometry turbocharger which would provide a higher intake
boost pressure available across a broader range of engine operation
than conventional 18 bar BMEP engines. The 27 bar BMEP technology
requires additional boost and thus would use a two-stage turbocharger
necessitating use of cooled exhaust gas recirculation (EGR) as
described below. The 18 bar BMEP technology is applied with 33 percent
engine downsizing, 24 bar BMEP is applied with 50 percent engine
downsizing, and 27 bar BMEP is applied with 56 percent engine
downsizing.
Cooled exhaust-gas recirculation (EGR) reduces the incidence of
knocking combustion with additional charge dilution and obviates the
need for fuel enrichment at high engine power. This allows for higher
boost pressure and/or compression ratio and further reduction in engine
displacement and both pumping and friction losses while maintaining
performance. Engines of this type use GDI and both dual cam phasing and
discrete variable valve lift. The EGR systems considered in this
assessment would use a dual-loop system with both high and low pressure
EGR loops and dual EGR coolers. For this proposal, cooled EGR is
considered to be a technology that can be added to a 24 bar BMEP engine
and is an enabling technology for 27 bar BMEP engines.
Diesel engines have several characteristics that give superior fuel
efficiency, including reduced pumping losses due to lack of (or greatly
reduced) throttling, high pressure direct injection of fuel, a
combustion cycle that operates at a higher compression ratio, and a
very lean air/fuel mixture relative to an equivalent-performance
gasoline engine. This technology requires additional enablers, such as
a NOx adsorption catalyst system or a urea/ammonia selective
catalytic reduction system for control of NOx emissions
during lean (excess air) operation.
b. Types of Transmission Technologies Considered
Improved automatic transmission controls optimize the shift
schedule to maximize fuel efficiency under wide ranging conditions and
minimizes losses associated with torque converter slip through lock-up
or modulation. The first level of controls is expected to exceed 85
percent penetration by the 2017 MY.
Shift optimization is a strategy whereby the engine and/or
transmission controller(s) emulates a CVT by continuously evaluating
all possible gear options that would provide the necessary tractive
power and select the best gear ratio that lets the engine run in the
most efficient operating zone.
Six-, seven-, and eight-speed automatic transmissions are optimized
by changing the gear ratio span to enable the engine to operate in a
more efficient operating range over a broader range of vehicle
operating conditions. While a six speed transmission application was
most prevalent for the MYs 2012-2016 final rule, eight speed
transmissions are expected to be readily available and applied in the
MYs 2017 through 2025 timeframe.
Dual clutch or automated shift manual transmissions are similar to
manual transmissions, but the vehicle controls shifting and launch
functions. A dual-clutch automated shift manual transmission (DCT) uses
separate clutches for even-numbered and odd-numbered gears, so the next
expected gear is pre-selected, which allows for faster and smoother
shifting. The 2012-2016 final rule limited DCT applications to a
maximum of 6-speeds. For this proposal we have considered both 6-speed
and 8-speed DCT transmissions.
Continuously variable transmission commonly uses V-shaped pulleys
connected by a metal belt rather than gears to provide ratios for
operation. Unlike manual and automatic transmissions with fixed
transmission ratios, continuously variable transmissions can provide
fully variable and an infinite number of transmission ratios that
enable the engine to operate in a more efficient operating range over a
broader range of vehicle operating conditions. The CVT is maintained
for existing baseline vehicles and not considered for future vehicles
in this proposal due to the availability of more cost effective
transmission technologies.
Manual 6-speed transmission offers an additional gear ratio, often
with a higher overdrive gear ratio, than a 5-speed manual transmission.
High Efficiency Gearbox (automatic, DCT or manual)--continuous
improvement in seals, bearings and clutches, super finishing of gearbox
parts, and development in the area of lubrication, all aimed at
reducing frictional and other parasitic load in the system for an
automatic or DCT type transmission.
c. Types of Vehicle Technologies Considered
Lower-rolling-resistance tires have characteristics that reduce
frictional losses associated with the energy dissipated mainly in the
deformation of the tires under load, thereby improving fuel economy and
reducing CO2 emissions. New for this proposal (and also
marking an advance over low rolling resistance tires considered during
the heavy duty greenhouse gas rulemaking, see 76 FR at 57207, 57229) is
a second level of lower rolling resistance tires that reduce frictional
losses even further. The first level of low rolling resistance tires
will have 10 percent rolling resistance reduction while the 2nd level
would have 20 percent rolling resistance reduction compared to 2008
baseline vehicle. The first level of lower rolling resistance tires is
expected to exceed 85 percent penetration by the 2017 MY.
Low-drag brakes reduce the sliding friction of disc brake pads on
rotors when the brakes are not engaged because the brake pads are
pulled away from the rotors.
Front or secondary axle disconnect for four-wheel drive systems
provides a torque distribution disconnect between front and rear axles
when torque is not required for the non-driving axle. This results in
the reduction of associated parasitic energy losses.
Aerodynamic drag reduction can be achieved via two approaches,
either reducing the drag coefficients or reducing vehicle frontal area.
To reduce the drag coefficient, skirts, air dams, underbody covers, and
more aerodynamic side view mirrors can be
[[Page 74924]]
applied. In addition to the standard aerodynamic treatments, the
agencies have included a second level of aerodynamic technologies which
could include active grill shutters, rear visors, and larger under body
panels. The first level of aero dynamic drag improvement is estimated
to reduce aerodynamic drag by 10 percent relative to the baseline 2008
vehicle while the second level would reduce aero dynamic drag by 20
percent relative to 2008 baseline vehicles. The second level of
aerodynamic technologies was not considered in the MYs 2012-2016 final
rule.
Mass Reduction can be achieved in many ways, such as material
substitution, design optimization, part consolidation, improving
manufacturing process, etc. The agencies applied mass reduction of up
to 20 percent relative to MY 2008 levels in this NPRM compared to only
10 percent in 2012-2016 final rule. The agencies also determined
effectiveness values for hybrid, plug-in and electric vehicles based on
net mass reduction, or the delta between the applied mass reduction
(capped at 20 percent) and the added mass of electrification
components. In assessing compliance strategies and in structuring the
standards, the agencies only considered amounts of vehicle mass
reduction that would result in what we estimated to be no adverse
effect on overall fleet safety. The agencies have an extensive
discussion of mass reduction technologies as well as the cost of mass
reduction in chapter 3 of the draft joint TSD.
d. Types of Electrification/Accessory and Hybrid Technologies
Considered
Electric power steering (EPS)/Electro-hydraulic power steering
(EHPS) is an electrically-assisted steering system that has advantages
over traditional hydraulic power steering because it replaces a
continuously operated hydraulic pump, thereby reducing parasitic losses
from the accessory drive. Manufacturers have informed the agencies that
full EPS systems are being developed for all light-duty vehicles,
including large trucks. However, the agencies have applied the EHPS
technology to large trucks and the EPS technology to all other light-
duty vehicles.
Improved accessories (IACC) may include high efficiency
alternators, electrically driven (i.e., on-demand) water pumps and
cooling fans. This excludes other electrical accessories such as
electric oil pumps and electrically driven air conditioner compressors.
New for this proposal is a second level of IACC (IACC2) which consists
of the IACC technologies and the addition of a mild regeneration
strategy and a higher efficiency alternator. The first level of IACC
improvements is expected to be at more than 85 percent penetration by
the 2017MY.
12-volt Stop-Start, sometimes referred to as idle-stop or 12-volt
micro hybrid is the most basic hybrid system that facilitates idle-stop
capability. These systems typically incorporate an enhanced performance
battery and other features such as electric transmission and cooling
pumps to maintain vehicle systems during idle-stop.
Higher Voltage Stop-Start/Belt Integrated Starter Generator (BISG)
sometimes referred to as a mild hybrid, provides idle-stop capability
and uses a higher voltage battery with increased energy capacity over
typical automotive batteries. The higher system voltage allows the use
of a smaller, more powerful electric motor. This system replaces a
standard alternator with an enhanced power, higher voltage, higher
efficiency starter-alternator, that is belt driven and that can recover
braking energy while the vehicle slows down (regenerative braking).
This mild hybrid technology is not included by either agency as an
enabling technology in the analysis supporting this proposal, although
some automakers have expressed interest in possibly using the
technology during the rulemaking time frame. EPA and NHTSA are
providing incentives to encourage this and similar hybrid technologies
on pick-up trucks in particular, as described in Section II.F, and the
agencies are in the process of including this technology for the final
rule analysis as we expand our understanding of the associated costs
and limitations.
Integrated Motor Assist (IMA)/Crank integrated starter generator
(CISG) provides idle-stop capability and uses a high voltage battery
with increased energy capacity over typical automotive batteries. The
higher system voltage allows the use of a smaller, more powerful
electric motor and reduces the weight of the wiring harness. This
system replaces a standard alternator with an enhanced power, higher
voltage, higher efficiency starter-alternator that is crankshaft
mounted and can recover braking energy while the vehicle slows down
(regenerative braking). The IMA technology is not included by either
agency as an enabling technology in the analysis supporting this
proposal, although it is included as a baseline technology because it
exists in our 2008 baseline fleet.
P2 Hybrid is a newly emerging hybrid technology that uses a
transmission integrated electric motor placed between the engine and a
gearbox or CVT, much like the IMA system described above except with a
wet or dry separation clutch which is used to decouple the motor/
transmission from the engine. In addition, a P2 hybrid would typically
be equipped with a larger electric machine. Disengaging the clutch
allows all-electric operation and more efficient brake-energy recovery.
Engaging the clutch allows efficient coupling of the engine and
electric motor and, when combined with a DCT transmission, reduces
gear-train losses relative to power-split or 2-mode hybrid systems.
2-Mode Hybrid is a hybrid electric drive system that uses an
adaptation of a conventional stepped-ratio automatic transmission by
replacing some of the transmission clutches with two electric motors
that control the ratio of engine speed to vehicle speed, while clutches
allow the motors to be bypassed. This improves both the transmission
torque capacity for heavy-duty applications and reduces fuel
consumption and CO2 emissions at highway speeds relative to
other types of hybrid electric drive systems. The 2-mode hybrid
technology is not included by either agency as an enabling technology
in the analysis supporting this proposal, although it is included as a
baseline technology because it exists in our 2008 baseline fleet.
Power-split Hybrid is a hybrid electric drive system that replaces
the traditional transmission with a single planetary gearset and a
motor/generator. This motor/generator uses the engine to either charge
the battery or supply additional power to the drive motor. A second,
more powerful motor/generator is permanently connected to the vehicle's
final drive and always turns with the wheels. The planetary gear splits
engine power between the first motor/generator and the drive motor to
either charge the battery or supply power to the wheels. The power-
split hybrid technology is not included by either agency as an enabling
technology in the analysis supporting this proposal, (the agencies
evaluate the P2 hybrid technology discussed above where power-split
hybrids might otherwise have been appropriate) although it is included
as a baseline technology because it exists in our 2008 baseline fleet.
Plug-in hybrid electric vehicles (PHEV) are hybrid electric
vehicles with the means to charge their battery packs from an outside
source of electricity (usually the electric grid). These
[[Page 74925]]
vehicles have larger battery packs with more energy storage and a
greater capability to be discharged than other hybrid electric
vehicles. They also use a control system that allows the battery pack
to be substantially depleted under electric-only or blended mechanical/
electric operation and batteries that can be cycled in charge
sustaining operation at a lower state of charge than is typical of
other hybrid electric vehicles. These vehicles are sometimes referred
to as Range Extended Electric Vehicles (REEV). In this MYs 2017-2025
analysis, PHEVs with several all-electric ranges--both a 20 mile and a
40 mile all-electric range--have been included as potential
technologies.
Electric vehicles (EV) are equipped with all-electric drive and
with systems powered by energy-optimized batteries charged primarily
from grid electricity. EVs with several ranges--75 mile, 100 mile and
150 mile range--have been included as potential technologies.
e. Technologies Considered but Deemed ``Not Ready'' in the MYs 2017-
2025 Timeframe
Fuel cell electric vehicles (FCEVs) utilize a full electric drive
platform but consume electricity generated by an on-board fuel cell and
hydrogen fuel. Fuel cells are electro-chemical devices that directly
convert reactants (hydrogen and oxygen via air) into electricity, with
the potential of achieving more than twice the efficiency of
conventional internal combustion engines. High pressure gaseous
hydrogen storage tanks are used by most automakers for FCEVs that are
currently under development. The high pressure tanks are similar to
those used for compressed gas storage in more than 10 million CNG
vehicles worldwide, except that they are designed to operate at a
higher pressure (350 bar or 700 bar vs. 250 bar for CNG). While we
expect there will be some limited introduction of FCEVs into the market
place in the time frame of this rule, we expect this introduction to be
relatively small, and thus FCEVs are not considered in the modeling
analysis conducted for this proposal.
There are a number of other technologies that the agencies have not
considered in their analysis, but may be considered for the final rule.
These include HCCI, ``multi-air'', and camless valve actuation, and
other advanced engines currently under development.
2. How did the agencies determine the costs of each of these
technologies?
As noted in the introduction to this section, most of the direct
cost estimates for technologies carried over from the MYs 2012-2016
final rule and subsequently used in this proposal are fundamentally
unchanged since the MYs 2012-2016 final rule analysis and/or the 2010
TAR. We say ``fundamentally'' unchanged since the basis of the direct
manufacturing cost estimates have not changed; however, the costs have
been updated to more recent dollars, the learning effects have resulted
in further cost reductions for some technologies, the indirect costs
are calculated using a modified methodology and the impact of long-term
ICMs is now present during the rulemaking timeframe. Besides these
changes, there are also some other notable changes to the costs used in
previous analyses. We highlight these changes in Section II.D.2.a,
below. We highlight the changes to the indirect cost methodology and
adjustments to more recent dollars in Sections II.D.2.b and c. Lastly,
we present some updated terminology used for our approach to estimating
learning effects in an effort to eliminate confusion with our past
terminology. This is discussed in Section II.D.2.d, below.
The agencies note that the technology costs included in this
proposal take into account only those associated with the initial build
of the vehicle. Although comments were received to the MYs 2012-2016
rulemaking that suggested there could be additional maintenance
required with some new technologies (e.g., turbocharging, hybrids,
etc.), and that additional maintenance costs could occur as a result,
the agencies believe that it is equally possible that maintenance costs
could decrease for some vehicles, especially when considering full
electric vehicles (which lack routine engine maintenance) or the
replacement of automatic transmissions with simpler dual-clutch
transmissions. The agencies request comment on the possible maintenance
cost impacts associated with this proposal, reminding potential
commenters that increased warranty costs are already considered as part
of the ICMs.
a. Direct Manufacturing Costs (DMC)
For direct manufacturing costs (DMC) related to turbocharging,
downsizing, gasoline direct injection, transmissions, as well as non-
battery-related costs on hybrid, plug-in hybrid and electric vehicles,
the agencies have relied on costs derived from teardown studies. For
battery related DMC for HEVs, PHEVs and EVs, the agencies have relied
on the BatPaC model developed by Argonne National Laboratory for the
Department of Energy. For mass reduction DMC, the agencies have relied
on several studies as described in detail in the draft Joint TSD. We
discuss each of these briefly here and in more detail in the draft
joint TSD. For the majority of the other technologies considered in
this proposal and described above, the agencies have relied on the
2012-2016 final rule and sources described there for estimates of DMC.
i. Costs from Tear-down Studies
As a general matter, the agencies believe that the best method to
derive technology cost estimates is to conduct studies involving tear-
down and analysis of actual vehicle components. A ``tear-down''
involves breaking down a technology into its fundamental parts and
manufacturing processes by completely disassembling actual vehicles and
vehicle subsystems and precisely determining what is required for its
production. The result of the tear-down is a ``bill of materials'' for
each and every part of the relevant vehicle systems. This tear-down
method of costing technologies is often used by manufacturers to
benchmark their products against competitive products. Historically,
vehicle and vehicle component tear-down has not been done on a large
scale by researchers and regulators due to the expense required for
such studies. While tear-down studies are highly accurate at costing
technologies for the year in which the study is intended, their
accuracy, like that of all cost projections, may diminish over time as
costs are extrapolated further into the future because of uncertainties
in predicting commodities (and raw material) prices, labor rates, and
manufacturing practices. The projected costs may be higher or lower
than predicted.
Over the past several years, EPA has contracted with FEV, Inc. and
its subcontractor Munro & Associates, to conduct tear-down cost studies
for a number of key technologies evaluated by the agencies in assessing
the feasibility of future GHG and CAFE standards. The analysis
methodology included procedures to scale the tear-down results to
smaller and larger vehicles, and also to different technology
configurations. FEV's methodology was documented in a report published
as part of the MY 2012-2016 rulemaking, detailing the costing of the
first tear-down conducted in this work (1 in the below
list).\136\ This report was peer reviewed by experts in the industry
and revised by FEV in response to the peer review
[[Page 74926]]
comments.\137\ Subsequent tear-down studies (2-5 in the below
list) were documented in follow-up FEV reports made available in the
public docket for the MY 2012-2016 rulemaking.\138\
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\136\ U.S. EPA, ``Light-Duty Technology Cost Analysis Pilot
Study,'' Contract No. EP-C-07-069, Work Assignment 1-3, December
2009, EPA-420-R-09-020, Docket EPA-HQ-OAR-2009-0472-11282.
\137\ FEV pilot study response to peer review document November
6, 2009, is at EPA-HQ-OAR-2009-0472-11285.
\138\ U.S. EPA, ``Light-duty Technology Cost Analysis--Report on
Additional Case Studies,'' EPA-HQ-OAR-2009-0472-11604.
---------------------------------------------------------------------------
Since then, FEV's work under this contract work assignment has
continued. Additional cost studies have been completed and are
available for public review.\139\ The most extensive study, performed
after the MY 2012-2016 Final Rule, involved whole-vehicle tear-downs of
a 2010 Ford Fusion powersplit hybrid and a conventional 2010 Ford
Fusion. (The latter served as a baseline vehicle for comparison.) In
addition to providing powersplit HEV costs, the results for individual
components in these vehicles were subsequently used by FEV/Munro to
cost another hybrid technology, the P2 hybrid, which employs similar
hardware. This approach to costing P2 hybrids was undertaken because P2
HEVs were not yet in volume production at the time of hardware
procurement for tear-down. Finally, an automotive lithium-polymer
battery was torn down and costed to provide supplemental battery
costing information to that associated with the NiMH battery in the
Fusion. This HEV cost work, including the extension of results to P2
HEVs, has been extensively documented in a new report prepared by
FEV.\140\ Because of the complexity and comprehensive scope of this HEV
analysis, EPA commissioned a separate peer review focused exclusively
on it. Reviewer comments generally supported FEV's methodology and
results, while including a number of suggestions for improvement many
of which were subsequently incorporated into FEV's analysis and final
report. The peer review comments and responses are available in the
rulemaking docket.141 142
---------------------------------------------------------------------------
\139\ FEV, Inc., ``Light-Duty Technology Cost Analysis, Report
on Additional Transmission, Mild Hybrid, and Valvetrain Technology
Case Studies'', November 2011.
\140\ FEV, Inc., ``Light-Duty Technology Cost Analysis, Power-
Split and P2 HEV Case Studies'', EPA-420-R-11-015, November 2011.
\141\ ICF, ``Peer Review of FEV Inc. Report Light Duty
Technology Cost Analysis, Power-Split and P2 Hybrid Electric Vehicle
Case Studies'', EPA-420-R-11-016, November 2011.
\142\ FEV and EPA, ``FEV Inc. Report `Light Duty Technology Cost
Analysis, Power-Split and P2 Hybrid Electric Vehicle Case Studies',
Peer Review Report--Response to Comments Document'', EPA-420-R-11-
017, November 2011.
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Over the course of this work assignment, teardown-based studies
have been performed thus far on the technologies listed below. These
completed studies provide a thorough evaluation of the new
technologies' costs relative to their baseline (or replaced)
technologies.
1. Stoichiometric gasoline direct injection (SGDI) and
turbocharging with engine downsizing (T-DS) on a DOHC (dual overhead
cam) I4 engine, replacing a conventional DOHC I4 engine.
2. SGDI and T-DS on a SOHC (single overhead cam) on a V6 engine,
replacing a conventional 3-valve/cylinder SOHC V8 engine.
3. SGDI and T-DS on a DOHC I4 engine, replacing a DOHC V6 engine.
4. 6-speed automatic transmission (AT), replacing a 5-speed AT.
5. 6-speed wet dual clutch transmission (DCT) replacing a 6-speed
AT.
6. 8-speed AT replacing a 6-speed AT.
7. 8-speed DCT replacing a 6-speed DCT.
8. Power-split hybrid (Ford Fusion with I4 engine) compared to a
conventional vehicle (Ford Fusion with V6). The results from this tear-
down were extended to address P2 hybrids. In addition, costs from
individual components in this tear-down study were used by the agencies
in developing cost estimates for PHEVs and EVs.
9. Mild hybrid with stop-start technology (Saturn Vue with I4
engine), replacing a conventional I4 engine. (Although results from
this cost study are included in the rulemaking docket, they were not
used by the agencies in this rulemaking's technical analyses.)
10. Fiat Multi-Air engine technology. (Although results from this
cost study are included in the rulemaking docket, they were not used by
the agencies in this rulemaking's technical analyses.)
Items 6 through 10 in the list above are new since the 2012-2016
final rule.
In addition, FEV and EPA extrapolated the engine downsizing costs
for the following scenarios that were based on the above study cases:
1. Downsizing a SOHC 2 valve/cylinder V8 engine to a DOHC V6.
2. Downsizing a DOHC V8 to a DOHC V6.
3. Downsizing a SOHC V6 engine to a DOHC 4 cylinder engine.
4. Downsizing a DOHC 4 cylinder engine to a DOHC 3 cylinder engine.
The agencies have relied on the findings of FEV for estimating the
cost of the technologies covered by the tear-down studies.
ii. Costs of HEV, EV & PHEV
The agencies have also reevaluated the costs for HEVs, PHEVs, and
EVs since both the 2012-2016 final rule and the 2010 TAR. First,
electrified vehicle technologies are developing rapidly and the
agencies sought to capture results from the most recent analysis.
Second, the 2012-2016 rule employed a single $/kWhr estimate and did
not consider the specific vehicle and technology application for the
battery when we estimated the cost of the battery. Specifically,
batteries used in HEVs (high power density applications) versus EVs
(high energy density applications) need to be considered appropriately
to reflect the design differences, the chemical material usage
differences and differences in $/kWhr as the power to energy ratio of
the battery changes for different applications.
To address these issues for this proposal, the agencies have done
two things. First, EPA has developed a spreadsheet tool that was used
to size the motor and battery based on the different road load of
various vehicle classes. Second, the agencies have used a battery cost
model developed by Argonne National Laboratory (ANL) for the Vehicle
Technologies Program of the U.S. Department of Energy (DOE) Office of
Energy Efficiency and Renewable Energy.\143\ The model developed by ANL
allows users to estimate unique battery pack costs using user
customized input sets for different hybridization applications, such as
strong hybrid, PHEV and EV. The DOE has established long term industry
goals and targets for advanced battery systems as it does for many
energy efficient technologies. ANL was funded by DOE to provide an
independent assessment of Li-ion battery costs because of ANL's
expertise in the field as one of the primary DOE National Laboratories
responsible for basic and applied battery energy storage technologies
for future HEV, PHEV and EV applications. Since publication of the 2010
TAR, ANL's battery cost model has been peer-reviewed and ANL has
updated the model and documentation to incorporate suggestions from
peer-reviewers, such as including a battery management system, a
battery disconnect unit, a thermal management system, etc.\144\ In this
proposal, NHTSA and EPA have used the recently revised version of this
updated model.
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\143\ ANL BatPac model Docket number EPA-HQ-OAR-2010-0799.
\144\ Nelson, P.A., Santinit, D.J., Barnes, J. ``Factors
Determining the Manufacturing Costs of Lithium-Ion Batteries for
PHEVs,'' 24th World Battery, Hybrid and Fuel Cell Electric Vehicle
Symposium and Exposition EVS-24, Stavenger, Norway, May 13-16, 2009
(www.evs24.org).
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The agencies are using the ANL model as the basis for estimating
large-
[[Page 74927]]
format lithium-ion batteries for this assessment for the following
reasons. The model was developed by scientists at ANL who have
significant experience in this area. The model uses a bill of materials
methodology for developing cost estimates. The ANL model appropriately
considers the vehicle application's power and energy requirements,
which are two of the fundamental parameters when designing a lithium-
ion battery for an HEV, PHEV, or EV. The ANL model can estimate
production costs based on user defined inputs for a range of production
volumes. The ANL model's cost estimates, while generally lower than the
estimates we received from the OEMs, are consistent with some of the
supplier cost estimates that EPA received from large-format lithium-ion
battery pack manufacturers. This includes data which was received from
on-site visits done by the EPA in the 2008-2011 time frame. Finally,
the ANL model has been described and presented in the public domain and
does not rely upon confidential business information (which could not
be reviewed by the public).
The potential for future reductions in battery cost and
improvements in battery performance relative to current batteries will
play a major role in determining the overall cost and performance of
future PHEVs and EVs. The U.S. Department of Energy manages major
battery-related R&D programs and partnerships, and has done so for many
years, including the ANL model utilized in this report. DOE has
reviewed the battery cost projections underlying this proposal and
supports the use of the ANL model for the purposes of this rulemaking.
We have also estimated cost associated with in-home chargers and
installation of in-home chargers expected to be necessary for PHEVs and
EVs. Charger costs are covered in more detail in chapter 3 of the draft
Joint TSD.
iii. Mass Reduction Costs
The agencies have revised the costs for mass reduction from the MYs
2012-2016 rule and the 2010 Technical Assessment Report. For this
proposal, the agencies are relying on a wide assortment of sources from
the literature as well as data provided from a number of OEMs. Based on
this review, the agencies have estimated a new cost curve such that the
costs increase as the levels of mass reduction increase. For the final
rule the agencies will consider any new studies that become available,
including two studies that the agencies are sponsoring and expect will
be completed in time to inform the final rule. These studies are
discussed in TSD chapter 3.
b. Indirect Costs (IC)
i. Markup Factors to Estimate Indirect Costs
For this analysis, indirect costs are estimated by applying
indirect cost multipliers (ICM) to direct cost estimates. ICMs were
derived by EPA as a basis for estimating the impact on indirect costs
of individual vehicle technology changes that would result from
regulatory actions. Separate ICMs were derived for low, medium, and
high complexity technologies, thus enabling estimates of indirect costs
that reflect the variation in research, overhead, and other indirect
costs that can occur among different technologies. ICMs were also
applied in the MYs 2012-2016 rulemaking.
Prior to developing the ICM methodology,\145\ EPA and NHTSA both
applied a retail price equivalent (RPE) factor to estimate indirect
costs. RPEs are estimated by dividing the total revenue of a
manufacturer by the direct manufacturing costs. As such, it includes
all forms of indirect costs for a manufacturer and assumes that the
ratio applies equally for all technologies. ICMs are based on RPE
estimates that are then modified to reflect only those elements of
indirect costs that would be expected to change in response to a
regulatory-induced technology change. For example, warranty costs would
be reflected in both RPE and ICM estimates, while marketing costs might
only be reflected in an RPE estimate but not an ICM estimate for a
particular technology, if the new regulatory-induced technology change
is not one expected to be marketed to consumers. Because ICMs
calculated by EPA are for individual technologies, many of which are
small in scale, they often reflect a subset of RPE costs; as a result,
for low complexity technologies, the RPE is typically higher than the
ICM. This is not always the case, as ICM estimates for particularly
complex technologies, specifically hybrid technologies (for near term
ICMs), and plug-in hybrid battery and full electric vehicle
technologies (for near term and long term ICMs), reflect higher than
average indirect costs, with the resulting ICMs for those technologies
equaling or exceeding the averaged RPE for the industry.
---------------------------------------------------------------------------
\145\ The ICM methodology was developed by RTI International,
under contract to EPA. The results of the RTI report were published
in Alex Rogozhin, Michael Gallaher, Gloria Helfand, and Walter
McManus, ``Using Indirect Cost Multipliers to Estimate the Total
Cost of Adding New Technology in the Automobile Industry.''
International Journal of Production Economics 124 (2010): 360-368.
---------------------------------------------------------------------------
There is some level of uncertainty surrounding both the ICM and RPE
markup factors. The ICM estimates used in this proposed action group
all technologies into four broad categories and treat them as if
individual technologies within each of the categories (``low'',
``medium'', ``high1'' and ``high2'' complexity) will have the same
ratio of indirect costs to direct costs. This simplification means it
is likely that the direct cost for some technologies within a category
will be higher and some lower than the estimate for the category in
general. More importantly, the ICM estimates have not been validated
through a direct accounting of actual indirect costs for individual
technologies. Rather, the ICM estimates were developed using adjustment
factors developed in two separate occasions: the first, a consensus
process, was reported in the RTI report; the second, a modified Delphi
method, was conducted separately and reported in an EPA memo.\146\ Both
these panels were composed of EPA staff members with previous
background in the automobile industry; the memberships of the two
panels overlapped but were not identical.\147\ The panels evaluated
each element of the industry's RPE estimates and estimated the degree
to which those elements would be expected to change in proportion to
changes in direct manufacturing costs. The method and estimates in the
RTI report were peer reviewed by three industry experts and
subsequently by reviewers for the International Journal of Production
Economics. RPEs themselves are inherently difficult to estimate because
the accounting statements of manufacturers do not neatly categorize all
cost elements as either direct or indirect costs. Hence, each
researcher developing an RPE estimate must apply a certain amount of
judgment to the allocation of the costs. Since empirical estimates of
ICMs are ultimately derived from the same data used to measure RPEs,
this affects both measures. However, the value of RPE has not been
measured for specific technologies, or for groups of specific
technologies. Thus applying a single
[[Page 74928]]
average RPE to any given technology by definition overstates costs for
very simple technologies, or understates them for advanced
technologies.
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\146\ Helfand, Gloria, and Sherwood, Todd. ``Documentation of
the Development of Indirect Cost Multipliers for Three Automotive
Technologies.'' Memorandum, Assessment and Standards Division,
Office of Transportation and Air Quality, U.S. Environmental
Protection Agency, August 2009.
\147\ NHTSA staff participated in the development of the process
for the second, modified Delphi panel, and reviewed the results as
they were developed, but did not serve on the panel.
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In every recent GHG and fuel economy rulemaking proposal, we have
requested comment on our ICM factors and whether it is most appropriate
to use ICMs or RPEs. We have generally received little to no comment on
the issue specifically, other than basic comments that the ICM values
are too low. In addition, in the June 2010 NAS report, NAS noted that
the under the initial ICMs, no technology would be assumed to have
indirect costs as high as the average RPE. NRC found that ``RPE factors
certainly do vary depending on the complexity of the task of
integrating a component into a vehicle system, the extent of the
required changes to other components, the novelty of the technology,
and other factors. However, until empirical data derived by means of
rigorous estimation methods are available, the committee prefers to use
average markup factors.'' \148\ The committee also stated that ``The
EPA (Rogozhin et al., 2009), however, has taken the first steps in
attempting to analyze this problem in a way that could lead to a
practical method of estimating technology-specific markup factors''
where ``this problem'' spoke to the issue of estimating technology-
specific markup factors and indirect cost multipliers.\149\
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\148\ NRC, Finding 3-2 at page 3-23.
\149\ NRC at page 3-19.
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The agencies note that, since the committee completed their work,
EPA has published its work in the Journal of Production Economics \150\
and has also published a memorandum furthering the development of
ICMs,\151\ neither of which the committee had at their disposal.
Further, having published two final rulemakings--the 2012-2016 light-
duty rule (see 75 FR 25324) and the more recent heavy-duty GHG rule
(see 76 FR 57106)--as well as the 2010 TAR where ICMs served as the
basis for all or most of the indirect costs, EPA believes that ICMs are
indeed fully developed for regulatory purposes. As thinking has
matured, we have adjusted our ICM factors such that they are slightly
higher and, importantly, we have changed the way in which the factors
are applied.
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\150\ Alex Rogozhin, Michael Gallaher, Gloria Helfand, and
Walter McManus, ``Using Indirect Cost Multipliers to Estimate the
Total Cost of Adding New Technology in the Automobile Industry.''
International Journal of Production Economics 124 (2010): 360-368.
\151\ Helfand, Gloria, and Sherwood, Todd. ``Documentation of
the Development of Indirect Cost Multipliers for Three Automotive
Technologies.'' Memorandum, Assessment and Standards Division,
Office of Transportation and Air Quality, U.S. Environmental
Protection Agency, August 2009.
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The first change--increased ICM factors--has been done as a result
of further thought among EPA and NHTSA that the ICM factors presented
in the original RTI report for low and medium complexity technologies
should no longer be used and that we should rely solely on the
modified-Delphi values for these complexity levels. For that reason, we
have eliminated the averaging of original RTI values with modified-
Delphi values and instead are relying solely on the modified-Delphi
values for low and medium complexity technologies. The second change--
the way the factors are applied--results in the warranty portion of the
indirect costs being applied as a multiplicative factor (thereby
decreasing going forward as direct manufacturing costs decrease due to
learning), and the remainder of the indirect costs being applied as an
additive factor (thereby remaining constant year-over-year and not
being reduced due to learning). This second change has a comparatively
large impact on the resultant technology costs and, we believe, more
appropriately estimates costs over time. In addition to these changes,
a secondary-level change was also made as part of this ICM
recalculation to ICMs. That change was to revise upward the RPE level
reported in the original RTI report from an original value of 1.46 to
1.5, to reflect the long term average RPE. The original RTI study was
based on 2008 data. However, an analysis of historical RPE data
indicates that, although there is year to year variation, the average
RPE has remained roughly constant at 1.5. ICMs will be applied to
future years' data and, therefore, NHTSA and EPA staffs believe that it
would be appropriate to base ICMs on the historical average rather than
a single year's result. Therefore, ICMs have been adjusted to reflect
this average level. These changes to the ICMs and the methodology are
described in greater detail in Chapter 3 of the draft Joint TSD.
ii. Stranded Capital
Because the production of automotive components is capital-
intensive, it is possible for substantial capital investments in
manufacturing equipment and facilities to become ``stranded'' (where
their value is lost, or diminished). This would occur when the capital
is rendered useless (or less useful) by some factor that forces a major
change in vehicle design, plant operations, or manufacturer's product
mix, such as a shift in consumer demand for certain vehicle types. It
can also be caused by new standards that phase-in at a rate too rapid
to accommodate planned replacement or redisposition of existing capital
to other activities. The lost value of capital equipment is then
amortized in some way over production of the new technology components.
It is difficult to quantify accurately any capital stranding
associated with new technology phase-ins under the proposed standards
because of the iterative dynamic involved--that is, the new technology
phase-in rate strongly affects the potential for additional cost due to
stranded capital, but that additional cost in turn affects the degree
and rate of phase-in for other individual competing technologies. In
addition, such an analysis is very company-, factory-, and
manufacturing process-specific, particularly in regard to finding
alternative uses for equipment and facilities. Nevertheless, in order
to account for the possibility of stranded capital costs, the agencies
asked FEV to perform a separate bounding analysis of potential stranded
capital costs associated with rapid phase-in of technologies due to new
standards, using data from FEV's primary teardown-based cost
analyses.\152\
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\152\ FEV, Inc., ``Potential Stranded Capital Analysis on EPA
Light-Duty Technology Cost Analysis'', Contract No. EP-C-07-069 Work
Assignment 3-3. November 2011.
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The assumptions made in FEV's stranded capital analysis with
potential for major impacts on results are:
All manufacturing equipment was bought brand new when the
old technology started production (no carryover of equipment used to
make the previous components that the old technology itself replaced).
10-year normal production runs: Manufacturing equipment
used to make old technology components is straight-line depreciated
over a 10-year life.
Factory managers do not optimize capital equipment phase-
outs (that is, they are assumed to routinely repair and replace
equipment without regard to whether or not it will soon be scrapped due
to adoption of new vehicle technology).
Estimated stranded capital is amortized over 5 years of
annual production at 450,000 units (of the new technology components).
This annual production is identical to that assumed in FEV's primary
teardown-based cost analyses. The 5-year recovery period is chosen to
help ensure a conservative analysis; the actual recovery would of
course vary greatly with market conditions.
[[Page 74929]]
The stranded capital analysis was performed for three transmission
technology scenarios, two engine technology scenarios, and one hybrid
technology scenario. The methodology used by EPA in applying the
results to the technology costs is described in Chapter 3.8.7 and
Chapter 5.1 of EPA's draft RIA. The methodology used by NHTSA in
applying the results to the technology costs is described in NHTSA's
preliminary RIA section V.
c. Cost Adjustment to 2009 Dollars
This simple change is to update any costs presented in earlier
analyses to 2009 dollars using the GDP price deflator as reported by
the Bureau of Economic Analysis on January 27, 2011. The factors used
to update costs from 2007 and 2008 dollars to 2009 dollars are shown
below. For the final rule, we are considering moving to 2010 dollars
but, for this analysis, given the timing of conducting modeling runs
and developing inputs to those runs, the factors for converting to 2010
dollars were not yet available.
[GRAPHIC] [TIFF OMITTED] TP01DE11.035
d. Cost Effects Due to Learning
For many of the technologies considered in this rulemaking, the
agencies expect that the industry should be able to realize reductions
in their costs over time as a result of ``learning effects,'' that is,
the fact that as manufacturers gain experience in production, they are
able to reduce the cost of production in a variety of ways. The
agencies continue to apply learning effects in the same way as we did
in both the MYs 2012-2016 final rule and in the 2010 TAR. However, we
have employed some new terminology in an effort to eliminate some
confusion that existed with our old terminology. This new terminology
was described in the recent heavy-duty GHG final rule (see 76 FR
57320). Our old terminology suggested we were accounting for two
completely different learning effects--one based on volume production
and the other based on time. This was not the case since, in fact, we
were actually relying on just one learning phenomenon, that being the
learning-by-doing phenomenon that results from cumulative production
volumes.
As a result, the agencies have also considered the impacts of
manufacturer learning on the technology cost estimates by reflecting
the phenomenon of volume-based learning curve cost reductions in our
modeling using two algorithms depending on where in the learning cycle
(i.e., on what portion of the learning curve) we consider a technology
to be--``steep'' portion of the curve for newer technologies and
``flat'' portion of the curve for more mature technologies. The
observed phenomenon in the economic literature which supports
manufacturer learning cost reductions are based on reductions in costs
as production volumes increase with the highest absolute cost reduction
occurring with the first doubling of production. The agencies use the
terminology ``steep'' and ``flat'' portion of the curve to distinguish
among newer technologies and more mature technologies, respectively,
and how learning cost reductions are applied in cost analyses.
Learning impacts have been considered on most but not all of the
technologies expected to be used because some of the expected
technologies are already used rather widely in the industry and,
presumably, quantifiable learning impacts have already occurred. The
agencies have applied the steep learning algorithm for only a handful
of technologies considered to be new or emerging technologies such as
PHEV and EV batteries which are experiencing heavy development and,
presumably, rapid cost declines in coming years. For most technologies,
the agencies have considered them to be more established and, hence,
the agencies have applied the lower flat learning algorithm. For more
discussion of the learning approach and the technologies to which each
type of learning has been applied the reader is directed to Chapter 3
of the draft Joint TSD. Note that, since the agencies had to project
how learning will occur with new technologies over a long period of
time, we request comments on the assumptions of learning costs and
methodology. In particular, we are interested in input on the
assumptions for advanced 27-bar BMEP cooled exhaust gas recirculation
(EGR) engines, which are currently still in the experimental stage and
not expected to be available in volume production until 2017. For our
analysis, we have based estimates of the costs of this engine on
current (or soon to be current) production technologies (e.g., gasoline
direct injection fuel systems, engine downsizing, cooled EGR, 18-bar
BMEP capable turbochargers), and assumed that, since learning (and the
associated cost reductions) begins in 2012 for them that it also does
for the similar technologies used in 27-bar BMEP engines. We seek
comment on the appropriateness of this assumption.\153\
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\153\ EPA notes that our modeling projections for the proposed
CO2 standards show a technology penetration rate of 2% in
the 2021MY and 5% in the 2025MY for 27-bar BMEP engines and, thus,
our cost estimates are not heavily reliant on this technology.
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3. How did the agencies determine the effectiveness of each of these
technologies?
In 2007 EPA conducted a detailed vehicle simulation project to
quantify the effectiveness of a multitude of technologies for the MYs
2012-2016
[[Page 74930]]
rule (as well as the 2010 NOI). This technical work was conducted by
the global engineering consulting firm, Ricardo, Inc. and was peer
reviewed and then published in 2008. For this current rule, EPA has
conducted another peer reviewed study with Ricardo to broaden the scope
of the original project in order to expand the range of vehicle classes
and technologies considered, consistent with a longer-term outlook
through model years MYs 2017-2025. The extent of the project was vast,
including hundreds of thousands of vehicle simulation runs. The results
were, in turn, employed to calibrate and update EPA's lumped parameter
model, which is used to quantify the synergies and dis-synergies
associated with combining technologies together for the purposes of
generating inputs for the agencies respective OMEGA and CAFE modeling.
Additionally, there were a number of technologies that Ricardo did
not model explicitly. For these, the agencies relied on a variety of
sources in the literature. A few of the values are identical to those
presented in the MYs 2012-2016 final rule, while others were updated
based on the newer version of the lumped parameter model. More details
on the Ricardo simulation, lumped parameter model, as well as the
effectiveness for supplemental technologies are described in Chapter 3
of the draft Joint TSD.
The agencies note that the effectiveness values estimated for the
technologies considered in the modeling analyses may represent average
values, and do not reflect the virtually unlimited spectrum of possible
values that could result from adding the technology to different
vehicles. For example, while the agencies have estimated an
effectiveness of 0.6 to 0.8 percent, depending on the vehicle subclass
for low friction lubricants, each vehicle could have a unique
effectiveness estimate depending on the baseline vehicle's oil
viscosity rating. Similarly, the reduction in rolling resistance (and
thus the improvement in fuel economy and the reduction in
CO2 emissions) due to the application of low rolling
resistance tires depends not only on the unique characteristics of the
tires originally on the vehicle, but on the unique characteristics of
the tires being applied, characteristics which must be balanced between
fuel efficiency, safety, and performance. Aerodynamic drag reduction is
much the same--it can improve fuel economy and reduce CO2
emissions, but it is also highly dependent on vehicle-specific
functional objectives. For purposes of the proposal, NHTSA and EPA
believe that employing average values for technology effectiveness
estimates, as adjusted depending on vehicle subclass, is an appropriate
way of recognizing the potential variation in the specific benefits
that individual manufacturers (and individual vehicles) might obtain
from adding a fuel-saving technology.
E. Joint Economic and Other Assumptions
The agencies' analysis of CAFE and GHG standards for the model
years covered by this proposed rulemaking rely on a range of forecast
information, estimates of economic variables, and input parameters.
This section briefly describes the agencies' proposed estimates of each
of these values. These values play a significant role in assessing the
benefits of both CAFE and GHG standards.
In reviewing these variables and the agencies' estimates of their
values for purposes of this NPRM, NHTSA and EPA reconsidered comments
that the agencies previously received on both the Interim Joint TAR and
during the MYs 2012-2016 light duty vehicle rulemaking and also
reviewed newly available literature. As a consequence, for today's
proposal, the agencies are proposing to update some economic
assumptions and parameter estimates, while retaining a majority of
values consistent with the Interim Joint TAR and the MYs 2012-2016
final rule. To review the parameters and assumptions the agencies used
in the 2012-2016 final rule, please refer to 75 FR 25378 and Chapter 4
of the Joint Technical Support Document that accompanied the final
rule.\154\ The proposed values summarized below are discussed in
greater detail in Chapter 4 of the joint TSD that accompanies this
proposal and elsewhere in the preamble and respective RIAs. The
agencies seek comment on all of the assumptions discussed below.
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\154\ See http://www.epa.gov/otaq/climate/regulations/420r10901.pdf.
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Costs of fuel economy-improving technologies--These inputs
are discussed in summary form above and in more detail in the agencies'
respective sections of this preamble, in Chapter 3 of the draft joint
TSD, and in the agencies' respective RIAs. The technology direct
manufacturing cost estimates used in this analysis are intended to
represent manufacturers' direct costs for high-volume production of
vehicles with these technologies in the year for which we state the
cost is considered ``valid.'' Technology direct manufacturing cost
estimates are fundamentally unchanged from those employed by the
agencies in the 2012-2016 final rule, the heavy-duty truck rule (to the
extent relevant), and TAR for most technologies, although revised costs
are used for batteries, mass reduction, transmissions, and a few other
technologies. Indirect costs are accounted for by applying near-term
indirect cost multipliers ranging from 1.24 to 1.77 to the estimates of
vehicle manufacturers' direct costs for producing or acquiring each
technology, depending on the complexity of the technology and the time
frame over which costs are estimated. These values are reduced to 1.19
to 1.50 over the long run as some aspects of indirect costs decline.
Indirect cost markup factors have been revised from previous
rulemakings and the Interim Joint TAR to reflect the agencies current
thinking regarding a number of issues. These changes are discussed in
detail in Section II.D.2 of this preamble and in Chapter 3 of the draft
joint TSD. Details of the agencies' technology cost assumptions and how
they were derived can be found in Chapter 3 of the draft joint TSD.
Potential opportunity costs of improved fuel economy--This
issue addresses the possibility that achieving the fuel economy
improvements required by alternative CAFE or GHG standards would
require manufacturers to compromise the performance, carrying capacity,
safety, or comfort of their vehicle models. If it did so, the resulting
sacrifice in the value of these attributes to consumers would represent
an additional cost of achieving the required improvements, and thus of
manufacturers' compliance with stricter standards. Currently the
agencies project that these vehicle attributes will not change as a
result of this rule. Section II.C above and Chapter 2 of the draft
joint TSD describes how the agency carefully selected an attribute-
based standard to minimize manufacturers' incentive to reduce vehicle
capabilities. While manufacturers may choose to do this for other
reasons, the agencies continue to believe that the rule itself will not
result in such changes. Additionally, EPA and NHTSA have sought to
include the cost of maintaining these attributes as part of the cost
estimates for technologies that are included in the cost analysis for
the proposal. For example, downsized engines are assumed to be
turbocharged, so that they provide the same performance and utility
even though they are smaller.\155\ Nonetheless, it is
[[Page 74931]]
possible that in some cases, the technology cost estimates may not
include adequate allowance for the necessary efforts by manufacturers
to maintain vehicle acceleration performance, payload, or utility while
improving fuel economy and reducing GHG emissions. As described in
Section III.D.3 and Section IV.G, there are two possible exceptions in
cases where some vehicle types are converted to hybrid or full electric
vehicles (EVs), but, in such cases, we believe that sufficient options
would exist for consumers concerned about the possible loss of utility
(e.g., they would purchase the non-hybridized version of the vehicle or
not buy an EV) that welfare loss should not necessarily be assumed.
Although consumer vehicle demand models can measure these effects, past
analyses using such models have not produced consistent estimates of
buyers' willingness-to-pay for higher fuel economy, and it is difficult
to decide whether one data source, model specification, or estimation
procedure is clearly preferred over another. Thus, the agencies seek
comment on how to estimate explicitly the changes in vehicle buyers'
choices and welfare from the combination of higher prices for new
vehicle models, increases in their fuel economy, and any accompanying
changes in vehicle attributes such as performance, passenger- and
cargo-carrying capacity, or other dimensions of utility.
---------------------------------------------------------------------------
\155\ The agencies do not believe that adding fuel-saving
technology should preclude future improvements in performance,
safety, or other attributes, though it is possible that the costs of
these additions may be affected by the presence of fuel-saving
technology.
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The on-road fuel economy ``gap''--Actual fuel economy
levels achieved by light-duty vehicles in on-road driving fall somewhat
short of their levels measured under the laboratory test conditions
used by EPA to establish compliance with the proposed CAFE and GHG
standards. The modeling approach in this proposal follows the 2012-2016
final rule and the Interim Joint TAR. In calculating benefits of the
program, the agencies estimate that actual on-road fuel economy
attained by light-duty vehicles that operate on liquid fuels will be 20
percent lower than published fuel economy ratings for vehicles that
operate on liquid fuels. For example, if the measured CAFE fuel economy
value of a light truck is 20 mpg, the on-road fuel economy actually
achieved by a typical driver of that vehicle is expected to be 16 mpg
(20*.80).\156\ Based on manufacturer confidential business information,
as well as data derived from the 2006 EPA fuel economy label rule, the
agencies use a 30 percent gap for consumption of wall electricity for
electric vehicles and plug-in hybrid electric vehicles.\157\
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\156\ U.S. Environmental Protection Agency, Final Technical
Support Document, Fuel Economy Labeling of Motor Vehicle Revisions
to Improve Calculation of Fuel Economy Estimates, EPA420-R-06-017,
December 2006.
\157\ See 71 FR at 77887, and U.S. Environmental Protection
Agency, Final Technical Support Document, Fuel Economy Labeling of
Motor Vehicle Revisions to Improve Calculation of Fuel Economy
Estimates, EPA420-R-06-017, December 2006 for general background on
the analysis. See also EPA's Response to Comments (EPA-420-R-11-005)
to the 2011 labeling rule, page 189, first paragraph, specifically
the discussion of the derived five cycle equation and the non-linear
adjustment with increasing MPG.
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Fuel prices and the value of saving fuel--Projected future
fuel prices are a critical input into the preliminary economic analysis
of alternative standards, because they determine the value of fuel
savings both to new vehicle buyers and to society, and fuel savings
account for the majority of the proposed rule's estimated benefits. For
this proposed rule, the agencies are using the most recent fuel price
projections from the U.S. Energy Information Administration's (EIA)
Annual Energy Outlook (AEO) 2011 reference case forecast. The forecasts
of fuel prices reported in EIA's AEO 2011 extend through 2035. Fuel
prices beyond the time frame of AEO's forecast were estimated using an
average growth rate for the years 2017-2035 to each year after 2035.
This is the same methodology used by the agencies in the 2012-2016
rulemaking, in the heavy duty truck and engine rule (76 FR 57106), and
in the Interim Joint TAR. For example, these forecasts of gasoline fuel
prices in 2009$ include $3.25 per gallon in 2017, $3.39 in 2021 and
$3.71 in 2035. Extrapolating as described above, retail gasoline prices
reach $4.16 per gallon in 2050 (measured in constant 2009 dollars). As
discussed in Chapter 4 of the draft Joint TSD, while the agencies
believe that EIA's AEO reference case generally represents a reasonable
forecast of future fuel prices for purposes of use in our analysis of
the benefits of this rule, we recognize that there is a great deal of
uncertainty in any such forecast that could affect our estimates. The
agencies request comment on how best to account for uncertainty in
future fuel prices.
Consumer valuation of fuel economy and payback period--In
estimating the value of fuel economy improvements to potential vehicle
buyers that would result from alternative CAFE and GHG standards, the
agencies assume that buyers value the resulting fuel savings over only
part of the expected lifetimes of the vehicles they purchase.
Specifically, we assume that buyers value fuel savings over the first
five years of a new vehicle's lifetime, and that buyers discount the
value of these future fuel savings. The five-year figure represents the
current average term of consumer loans to finance the purchase of new
vehicles.
Vehicle sales assumptions--The first step in estimating
lifetime fuel consumption by vehicles produced during a model year is
to calculate the number that are expected to be produced and sold. The
agencies relied on the AEO 2011 Reference Case for forecasts of total
vehicle sales, while the baseline market forecast developed by the
agencies (discussed in Section II.B and in Chapter 1 of the TSD)
divided total projected sales into sales of cars and light trucks.
Vehicle lifetimes and survival rates--As in the 2012-2016
final rule and Interim Joint TAR, we apply updated values of age-
specific survival rates for cars and light trucks to adjusted forecasts
of passenger car and light truck sales to determine the number of these
vehicles expected to remain in use during each year of their lifetimes.
These values remain unchanged from prior analyses.
Vehicle miles traveled--We calculated the total number of
miles that cars and light trucks produced in each model year will be
driven during each year of their lifetimes using estimates of annual
vehicle use by age tabulated from the Federal Highway Administration's
2001 National Household Travel Survey (NHTS),\158\ adjusted to account
for the effects on vehicle use of subsequent increases in fuel prices.
In order to insure that the resulting mileage schedules imply
reasonable estimates of future growth in total car and light truck use,
we calculated the rate of future growth in annual mileage at each age
that would be necessary for total car and light truck travel to
increase at the rates forecast in the AEO 2011 Reference Case. The
growth rate in average annual car and light truck use produced by this
calculation is approximately 1 percent per year through 2030 and 0.5
percent thereafter. We applied these growth rates applied to the
mileage figures derived from the 2001 NHTS to estimate annual mileage
by vehicle age during each year of the expected lifetimes of MY 2017-
2025 vehicles. A similar approach to estimating future vehicle use was
used in the 2012-2016 final rule and Interim Joint TAR, but the
[[Page 74932]]
future growth rates in average vehicle use have been revised for this
proposal.
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\158\ For a description of the Survey, see http://www.bts.gov/programs/national_household_travel_survey/ (last accessed Sept.
9, 2011).
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Accounting for the rebound effect of higher fuel economy--
The rebound effect refers to the increase in vehicle use that results
if an increase in fuel efficiency lowers the cost of driving. For
purposes of this NPRM, the agencies elected to continue to use a 10
percent rebound effect in their analyses of fuel savings and other
benefits from higher standards, consistent with the 2012-2016 light-
duty vehicle rulemaking and the Interim Joint TAR. That is, we assume a
10 percent decrease in fuel cost per mile resulting from our proposed
standards would result in a 1 percent increase in the annual number of
miles driven at each age over a vehicle's lifetime. In Chapter 4 of the
joint TSD, we provide a detailed explanation of the basis for our
rebound estimate, including a summary of new literature published since
the 2012-2016 rulemaking that lends further support to the 10 percent
rebound estimate. We also refer the reader to Chapters X and XII of
NHTSA's PRIA and Chapter 4 of the EPA DRIA that accompanies this
preamble for sensitivity and uncertainty analyses of alternative
rebound assumptions.
Benefits from increased vehicle use--The increase in
vehicle use from the rebound effect provides additional benefits to
drivers, who may make more frequent trips or travel farther to reach
more desirable destinations. This additional travel provides benefits
to drivers and their passengers by improving their access to social and
economic opportunities away from home. The analysis estimates the
economic benefits from increased rebound-effect driving as the sum of
the fuel costs they incur in that additional travel plus the consumer
surplus drivers receive from the improved accessibility their travel
provides. As in the 2012-2016 final rule we estimate the economic value
of this consumer surplus using the conventional approximation, which is
one half of the product of the decline in vehicle operating costs per
vehicle-mile and the resulting increase in the annual number of miles
driven.
Added costs from congestion, accidents, and noise--
Although it provides benefits to drivers as described above, increased
vehicle use associated with the rebound effect also contributes to
increased traffic congestion, motor vehicle accidents, and highway
noise. Depending on how the additional travel is distributed over the
day and where it takes place, additional vehicle use can contribute to
traffic congestion and delays by increasing traffic volumes on
facilities that are already heavily traveled. These added delays impose
higher costs on drivers and other vehicle occupants in the form of
increased travel time and operating expenses. At the same time, this
travel also increases costs associated with traffic accidents, and
increased traffic noise. The agencies rely on estimates of congestion,
accident, and noise costs caused by automobiles and light trucks
developed by the Federal Highway Administration to estimate these
increased external costs caused by added driving.\159\ This method is
consistent with the 2012-2016 final rule.
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\159\ These estimates were developed by FHWA for use in its 1997
Federal Highway Cost Allocation Study; http://www.fhwa.dot.gov/policy/hcas/final/index.htm (last accessed Sept. 9, 2011).
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Petroleum consumption and import externalities--U.S.
consumption of imported petroleum products also impose costs on the
domestic economy that are not reflected in the market price for crude
petroleum, or in the prices paid by consumers of petroleum products
such as gasoline. These costs include (1) higher prices for petroleum
products resulting from the effect of increased U.S. demand for
imported oil on the world oil price (``monopsony costs''); (2) the
expected costs associated with the risk of disruptions to the U.S.
economy caused by sudden reductions in the supply of imported oil to
the U.S.; and (3) expenses for maintaining a U.S. military presence to
secure imported oil supplies from unstable regions, and for maintaining
the strategic petroleum reserve (SPR) to cushion the U.S. economy
against the effects of oil supply disruptions.\160\ Although the
reduction in the global price of petroleum and refined products due to
decreased demand for fuel in the U.S. resulting from this rule
represents a benefit to the U.S. economy, it simultaneously represents
an economic loss to other countries that produce and sell oil or
petroleum products to the U.S. Recognizing the redistributive nature of
this ``monopsony effect'' when viewed from a global perspective (which
is consistent with the agencies' use of a global estimate for the
social cost of carbon to value reductions in CO2 emissions,
the energy security benefits estimated to result from this program
exclude the value of this monopsony effect. In contrast, the
macroeconomic disruption and adjustment costs that arise from sudden
reductions in the supply of imported oil to the U.S. do not have
offsetting impacts outside of the U.S., so the estimated reduction in
their expected value stemming from reduced U.S. petroleum imports is
included in the energy security benefits estimated for this program.
U.S. military costs are excluded from the analysis because their
attribution to particular missions or activities is difficult. Also,
historical variation in U.S. military costs have not been associated
with changes in U.S. petroleum imports, although we recognize that more
broadly, there may be significant (if unquantifiable) benefits in
improving national security by reducing oil imports. Similarly, since
the size or other factors affecting the cost of maintaining the SPR
historically have not varied in response to changes in U.S. oil import
levels, changes in the costs of the SPR are excluded from the estimates
of the energy security benefits of the program. To summarize, the
agencies have included only the macroeconomic disruption and adjustment
costs portion of the energy security benefits to estimate the monetary
value of the total energy security benefits of this program. Based on a
recent update of an earlier peer-reviewed Oak Ridge National Laboratory
study that was used in support of the both the 2012-2016 light duty
vehicle and the 2014-2018 medium- and heavy-duty vehicle rulemaking, we
estimate that each gallon of fuel saved will reduce the expected
macroeconomic disruption and adjustment costs of sudden reductions in
the supply of imported oil to the U.S. economy by $0.185 (2009$) in
2025. Each gallon of fuel saved as a consequence of higher standards is
anticipated to reduce total U.S. imports of crude petroleum or refined
fuel by 0.95 gallons.\161\ The energy security analysis conducted for
this proposal also estimates that the world price of oil will fall
modestly in response to lower U.S. demand for refined
fuel.162 163 The energy security
[[Page 74933]]
methodology used in this proposal is the same as that used by the
agencies in both the 2012-2016 light duty vehicle and 2014-2018 medium-
and heavy-duty vehicle rulemakings. In those rulemakings, the agencies
addressed comments about the magnitude of their energy security
estimates and methodological issues such as whether to include the
monopsony benefits in energy security calculations.
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\160\ See, e.g., Bohi, Douglas R. and W. David Montgomery
(1982). Oil Prices, Energy Security, and Import Policy Washington,
DC: Resources for the Future, Johns Hopkins University Press; Bohi,
D. R., and M. A. Toman (1993). ``Energy and Security: Externalities
and Policies,'' Energy Policy 21:1093-1109; and Toman, M. A. (1993).
``The Economics of Energy Security: Theory, Evidence, Policy,'' in
A. V. Kneese and J. L. Sweeney, eds. (1993). Handbook of Natural
Resource and Energy Economics, Vol. III. Amsterdam: North-Holland,
pp. 1167-1218.
\161\ Each gallon of fuel saved is assumed to reduce imports of
refined fuel by 0.5 gallons, and the volume of fuel refined
domestically by 0.5 gallons. Domestic fuel refining is assumed to
utilize 90 percent imported crude petroleum and 10 percent
domestically-produced crude petroleum as feedstocks. Together, these
assumptions imply that each gallon of fuel saved will reduce imports
of refined fuel and crude petroleum by 0.50 gallons + 0.50
gallons*90 percent = 0.50 gallons + 0.45 gallons = 0.95 gallons.
\162\ Leiby, Paul. Oak Ridge National Laboratory. ``Approach to
Estimating the Oil Import Security Premium for the MY 2017-2025
Light Duty Vehicle Proposal'' 2011.
\163\ Note that this change in world oil price is not reflected
in the AEO projections described earlier in this section.
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Air pollutant emissions--
[cir] Impacts on criteria air pollutant emissions--Criteria air
pollutants emitted by vehicles and during fuel production and
distribution include carbon monoxide (CO), hydrocarbon compounds
(usually referred to as ``volatile organic compounds,'' or VOC),
nitrogen oxides (NOX), fine particulate matter
(PM2.5), and sulfur oxides (SOX). Although
reductions in domestic fuel refining and distribution that result from
lower fuel consumption will reduce U.S. emissions of these pollutants,
additional vehicle use associated with the rebound effect, and
additional electricity production will increase emissions. Thus the net
effect of stricter standards on emissions of each criteria pollutant
depends on the relative magnitudes of reduced emissions from fuel
refining and distribution, and increases in emissions resulting from
added vehicle use. The agencies' analysis assumes that the per-mile
emission rates for cars and light trucks produced during the model
years affected by the proposed rule will remain constant at the levels
resulting from EPA's Tier 2 light duty vehicle emissions standards. The
agencies' approach to estimating criteria air pollutant emissions is
consistent with the method used in the 2012-2016 final rule (where the
agencies received no significant adverse comments), although the
agencies employ a more recent version of the EPA's MOVES (Motor Vehicle
Emissions Simulator) model.
[cir] Economic value of reductions in criteria pollutant
emissions--For the purpose of the joint technical analysis, EPA and
NHTSA estimate the economic value of the human health benefits
associated with reducing population exposure to PM2.5 using
a ``benefit-per-ton'' method. These PM2.5-related benefit-
per-ton estimates provide the total monetized benefits to human health
(the sum of reductions in premature mortality and premature morbidity)
that result from eliminating one ton of directly emitted
PM2.5, or one ton of other pollutants that contribute to
atmospheric levels of PM2.5 (such as NOX,
SOX, and VOCs), from a specified source. These unit values
remain unchanged from the 2012-2016 final rule, and the agencies
received no significant adverse comment on the analysis. Note that the
agencies' analysis includes no estimates of the direct health or other
benefits associated with reductions in emissions of criteria pollutants
other than PM2.5.
[cir] Impacts on greenhouse gas (GHG) emissions--NHTSA estimates
reductions in emissions of carbon dioxide (CO2) from
passenger car and light truck use by multiplying the estimated
reduction in consumption of fuel (gasoline and diesel) by the quantity
or mass of CO2 emissions released per gallon of fuel
consumed. EPA directly calculates reductions in total CO2
emissions from the projected reductions in CO2 emissions by
each vehicle subject to the proposed rule.\164\ Both agencies also
calculate the impact on CO2 emissions that occur during fuel
production and distribution resulting from lower fuel consumption, as
well as the emission impacts due to changes in electricity production.
Although CO2 emissions account for nearly 95 percent of
total GHG emissions that result from fuel combustion during vehicle
use, emissions of other GHGs are potentially significant as well
because of their higher ``potency'' as GHGs than that of CO2
itself. EPA and NHTSA therefore also estimate the change in upstream
and downstream emissions of non-CO2 GHGs that occur during
the aforementioned processes due to their respective standards.\165\
The agencies approach to estimating GHG emissions is consistent with
the method used in the 2012-2016 final rule and the Interim Joint TAR.
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\164\ The weighted average CO2 content of
certification gasoline is estimated to be 8,887 grams per gallon,
while that of diesel fuel is estimated to be approximately 10,200
grams per gallon.
\165\ There is, however, an exception. NHTSA does not and cannot
claim benefit from reductions in downstream emissions of HFCs
because they do not relate to fuel economy, while EPA does because
all GHGs are relevant for purposes of EPA's Clean Air Act standards.
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[cir] Economic value of reductions in CO2 emissions--EPA
and NHTSA assigned a dollar value to reductions in CO2
emissions using recent estimates of the ``social cost of carbon'' (SCC)
developed by a federal interagency group that included the two
agencies. As that group's report observed, ``The SCC is an estimate of
the monetized damages associated with an incremental increase in carbon
emissions in a given year. It is intended to include (but is not
limited to) changes in net agricultural productivity, human health,
property damages from increased flood risk, and the value of ecosystem
services due to climate change.'' \166\ Published estimates of the SCC
vary widely as a result of uncertainties about future economic growth,
climate sensitivity to GHG emissions, procedures used to model the
economic impacts of climate change, and the choice of discount
rates.\167\ The SCC estimates used in this analysis were developed
through an interagency process that included EPA, DOT/NHTSA, and other
executive branch entities, and concluded in February 2010. We first
used these SCC estimates in the benefits analysis for the 2012-2016
light-duty vehicle rulemaking. We have continued to use these estimates
in other rulemaking analyses, including the Greenhouse Gas Emission
Standards and Fuel Efficiency Standards for Medium- and Heavy-Duty
Engines and Vehicles (76 FR 57106, p. 57332) . The SCC Technical
Support Document (SCC TSD) provides a complete discussion of the
methods used to develop these SCC estimates.
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\166\ SCC TSD, see page 2. Docket ID EPA-HQ-OAR-2009-0472-
114577, Technical Support Document: Social Cost of Carbon for
Regulatory Impact Analysis Under Executive Order 12866, Interagency
Working Group on Social Cost of Carbon, with participation by
Council of Economic Advisers, Council on Environmental Quality,
Department of Agriculture, Department of Commerce, Department of
Energy, Department of Transportation, Environmental Protection
Agency, National Economic Council, Office of Energy and Climate
Change, Office of Management and Budget, Office of Science and
Technology Policy, and Department of Treasury (February 2010). Also
available at http://epa.gov/otaq/climate/regulations.htm
\167\ SCC TSD, see pages 6-7.
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The value of changes in driving range--By reducing the
frequency with which drivers typically refuel their vehicles, and by
extending the upper limit of the range they can travel before requiring
refueling, improving fuel economy and reducing GHG emissions provides
additional benefits to their owners. The primary benefits from the
reduction in the number of required refueling cycles are the value of
time saved to drivers and other adult vehicle occupants, as well as the
savings to owners in terms of the cost of the fuel that would have
otherwise been consumed in transit during those (now no longer
required) refueling trips. Using recent data on vehicle owners'
refueling patterns gathered from a survey conducted by the National
Automotive Sampling System (NASS), NHTSA was able to better estimate
parameters associated with refueling trips. NASS data provided NHTSA
with
[[Page 74934]]
the ability to estimate the average time required for a refueling trip,
the average time and distance drivers typically travel out of their way
to reach fueling stations, the average number of adult vehicle
occupants, the average quantity of fuel purchased, and the distribution
of reasons given by drivers for refueling. From these estimates, NHTSA
constructed an updated set of economic assumptions to update those used
in the 2012-2016 FRM in calculating refueling-related benefits. The
2012-2016 FRM discusses NHTSA's intent to utilize the NASS data on
refueling trip characteristics in future rulemakings. While the NASS
data improve the precision of the inputs used in the analysis of the
benefits resulting from fewer refueling cycles, the framework of the
analysis remains essentially the same as in the 2012-2016 final rule.
Note that this topic and associated benefits were not covered in the
Interim Joint TAR. Detailed discussion and examples of the agencies'
approach are provided in Chapter VIII of NHTSA's PRIA and Chapter 8 of
EPA's DRIA.
Discounting future benefits and costs--Discounting future
fuel savings and other benefits is intended to account for the
reduction in their value to society when they are deferred until some
future date, rather than received immediately.\168\ The discount rate
expresses the percent decline in the value of these future fuel-savings
and other benefits--as viewed from today's perspective--for each year
they are deferred into the future. In evaluating the non-climate
related benefits of the final standards, the agencies have employed
discount rates of both 3 percent and 7 percent, consistent with the
2012-2016 final rule and OMB Circular A-4 guidance.
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\168\ Because all costs associated with improving vehicles' fuel
economy and reducing CO2 emissions are assumed to be
incurred at the time they are produced, these costs are already
expressed in their present values as of each model year affected by
the proposed rule, and require discounting only for the purpose of
expressing them as present values as of a common year.
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For the reader's reference, Table II-8 and Table II-9 below
summarize the values used to calculate the impacts of each proposed
standard. The values presented in this table are summaries of the
inputs used for the models; specific values used in the agencies'
respective analyses may be aggregated, expanded, or have other relevant
adjustments. See Joint TSD 4 and each agency's respective RIA for
details. The agencies seek comment on the economic assumptions
presented in the table.
In addition, the agencies analyzed the sensitivity of their
estimates of the benefits and costs associated with this proposed rule
to variation in the values of many of these economic assumptions and
other inputs. The values used in these sensitivity analyses and their
results are presented their agencies' respective RIAs. A wide range of
estimates is available for many of the primary inputs that are used in
the agencies' CAFE and GHG emissions models. The agencies recognize
that each of these values has some degree of uncertainty, which the
agencies further discuss in the draft Joint TSD. The agencies have
tested the sensitivity of their estimates of costs and benefits to a
range of assumptions about each of these inputs, and present these
sensitivity analyses in their respective RIAs. For example, NHTSA
conducted separate sensitivity analyses for, among other things,
discount rates, fuel prices, the social cost of carbon, the rebound
effect, consumers' valuation of fuel economy benefits, battery costs,
mass reduction costs, the value of a statistical life, and the indirect
cost markup factor. This list is similar in scope to the list that was
examined in the MY 2012-2016 final rule, but includes battery costs and
mass reduction costs, while dropping military security and monopsony
costs. NHTSA's sensitivity analyses are contained in Chapter X of
NHTSA's PRIA. EPA conducted sensitivity analyses on the rebound effect,
battery costs, mass reduction costs, the indirect cost markup factor
and on the cost learning curves used in this analysis. These analyses
are found in Chapters 3 and 4 of the EPA DRIA. In addition, NHTSA
performs a probabilistic uncertainty analysis examining simultaneous
variation in the major model inputs including technology costs,
technology benefits, fuel prices, the rebound effect, and military
security costs. This information is provided in Chapter XII of NHTSA's
PRIA. These uncertainty parameters are consistent with those used in
the MY 2012-2016 final rule. The agencies will consider conducting
additional sensitivity and uncertainty analyses for the final rule as
appropriate.
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F. Air Conditioning Efficiency CO2 Credits and Fuel
Consumption Improvement Values, Off-cycle Reductions, and Full-size
Pickup Trucks
For MYs 2012-2016, EPA provided an option for manufacturers to
generate credits for complying with GHG standards by incorporating
efficiency improving vehicle technologies that would reduce
CO2 and fuel consumption from air conditioning (A/C)
operation or from other vehicle operation that is not captured by the
Federal Test Procedure (FTP) and Highway Fuel Economy Test (HFET), also
collectively known as the ``two-cycle'' test procedure. EPA referred to
these credits as ``off-cycle credits.''
For this proposal, EPA, in coordination with NHTSA, is proposing
under their EPCA authorities to allow manufacturers to generate fuel
consumption improvement values for purposes of CAFE compliance based on
the use of A/C efficiency and off-cycle technologies. This proposed
expansion is a change from the 2012-16 final rule where EPA only
provided the A/C efficiency and off-cycle credits for the GHG program.
EPA is not proposing to allow these increases for compliance with the
CAFE program for MYs 2012-2016, nor to allow any compliance with the
CAFE program as a result of reductions in direct A/C emissions
resulting from leakage of HFCs from air conditioning systems, which
remains a flexibility unique to the GHG program.
The agencies believe that because of the significant amount of
credits and fuel consumption improvement values offered under the A/C
program (up to 5.0 g/mi for cars and 7.2 g/mi for trucks which is
equivalent to a fuel consumption improvement value of 0.000563 gal/mi
for cars and 0.000586 gal/mi for trucks) that manufacturers will
maximize the benefits these credits and fuel consumption improvement
values afford. Consistent with the 2012-2016 final rule, EPA will
continue to adjust the stringency of the two-cycle tailpipe
CO2 standards in order to account for this projected
widespread penetration of A/C credits (as described more fully in
Section III.C), and NHTSA has also accounted for expected A/C
efficiency improvements in determining the maximum feasible CAFE
standards. The agencies discuss these proposed CO2 credits/
fuel consumption improvement values below and in more detail in the
Joint TSD (Chapter 5). EPA discusses additional proposed GHG A/C
leakage credits that are unrelated to CO2 and fuel
consumption (though they are part of EPA's CO2 equivalent
calculation) in Section III.C below.
EPA, in coordination with NHTSA, is also proposing to add for MYs
2017-2025 a new incentive for Advanced Technology for Full Sized Pickup
Trucks. Under its EPCA authority for CAFE and under its CAA authority
for GHGs, EPA is proposing GHG credits and fuel economy improvement
values for manufacturers that hybridize a significant quantity of their
full size pickup trucks, or that use other technologies that
significantly reduce CO2 emissions and fuel consumption.
Further discussions of the A/C, off-cycle, and the advanced technology
for pick-up truck incentive programs are provided below.
1. Proposed Air Conditioning CO2 Credits and Fuel
Consumption Improvement Values
The credits/fuel consumption improvement values for higher-
efficiency air conditioning technologies are very similar to those EPA
included in the 2012-2016 GHG final rule. The proposed credits/fuel
consumption improvement values represent an improved understanding of
the relationships between A/C technologies and CO2 emissions
and fuel consumption. Much of this
[[Page 74938]]
understanding results from a new vehicle simulation tool that EPA has
developed and the agencies are using for this proposal. EPA designed
this model to simulate in an integrated way the dynamic behavior of the
several key systems that affect vehicle efficiency: The engine,
electrical, transmission, and vehicle systems. The simulation model is
supported by data from a wide range of sources; Chapter 2 of the Draft
Regulatory Impact Analysis discusses its development in more detail.
The agencies have identified several technologies that are key to
the amount of fuel a vehicle consumes and thus the amount of
CO2 it emits. Most of these technologies already exist on
current vehicles, but manufacturers can improve the energy efficiency
of the technology designs and operation. For example, most of the
additional air conditioning related load on an engine is due to the
compressor which pumps the refrigerant around the system loop. The less
the compressor operates, the less load the compressor places on the
engine resulting in less fuel consumption and CO2 emissions.
Thus, optimizing compressor operation with cabin demand using more
sophisticated sensors, controls and control strategies, is one path to
improving the overall efficiency of the A/C system. Additional
components or control strategies are available to manufacturers to
reduce the air conditioning load on the engine which are discussed in
more detail in Chapter 5 of the joint TSD. Overall, the agencies have
concluded that these improved technologies could together reduce A/C-
related CO2 and fuel consumption of today's typical air
conditioning systems by 42%. The agencies propose to use this level of
improvement to represent the maximum efficiency credit available to a
manufacturer.
Demonstrating the degree of efficiency improvement that a
manufacturer's air conditioning systems achieve--thus quantifying the
appropriate amount of GHG credit and CAFE fuel consumption improvement
value the manufacturer is eligible for--would ideally involve a
performance test. That is, a test that would directly measure
CO2 (and thus allow calculation of fuel consumption) before
and after the incorporation of the improved technologies. Progress
toward such a test continues. As mentioned in the introduction to this
section, the primary vehicle emissions and fuel consumption test, the
Federal Test Procedure (FTP) or ``two-cycle'' testing, does not require
or simulate air conditioning usage through the test cycle. The SC03
test is designed to identify any effect the air conditioning system has
on other emissions when it is operating under extreme conditions, but
is not designed to measure the small differences in CO2 due
to different A/C technologies.
At the time of the final rule for the 2012-2016 GHG program, EPA
concluded that a practical, performance-based test procedure capable of
quantifying efficiency credits was not yet available. However, EPA
introduced a specialized new procedure that it believed would be
appropriate for the more limited purpose of demonstrating that the
design improvements for which a manufacturer was earning credits
produced actual efficiency improvements. EPA's test is a fairly simple
test, performed while the vehicle is at idle. Beginning with the 2014
model year, the A/C Idle Test was to be used to qualify a manufacturer
to be able to use the technology lookup table (``menu'') approach to
quantify credits. That is, a manufacturer would need to achieve a
certain CO2 level on the Idle Test in order to access the
``menu'' and generate GHG efficiency credits.
Since that final rule was published, several manufacturers have
provided data that raises questions about the ability of the Idle Test
to fulfill its intended purpose. Especially for small, lower-powered
vehicles, the data also shows that it is difficult to achieve
reasonable test-to-test repeatability. The manufacturers have also
informed EPA (in meetings subsequent to the 2012-2016 final rule) that
the Idle Test does not accurately capture the improvements from many of
the technologies listed in the menu. EPA has been aware of all of these
issues, and proposing to modify the Idle Test such that the threshold
would be a function of engine displacement, in contrast to the flat
threshold from the previous rule. EPA continues to consider this Idle
Test to be a reasonable measure of some A/C CO2 emissions as
there is significant real-world driving activity at idle, and the Idle
Test significantly exercises a number of the A/C technologies from the
menu. Sec III.C.1.b.i below and Chapter 5 (5.1.3.5) of the Joint TSD
describe further the adjustments EPA is proposing to the Idle Test for
manufacturers to qualify for MYs 2014-2016 A/C efficiency credits. EPA
proposes that manufacturers continue to use the menu for MYs 2014-2016
to determine credits for the GHG program. This was also the approach
that EPA used for efficiency credits in the MY2012-2016 GHG rule.
However for MYs 2017-2025, EPA is proposing a new test procedure to
demonstrate the effectiveness of A/C efficiency technologies and
credits as described below. For MYs 2014-2016, EPA requests comment on
substituting the Idle Test requirement with a reporting requirement
from this new test procedure as described in Section III.C.1.b.i below.
In order to correct the shortcomings of the available tests, EPA
has developed a four-part performance test, called the AC17. The test
includes the SC03 driving cycle, the fuel economy highway cycle, in
addition to a pre-conditioning cycle, and a solar soak period. EPA is
proposing that manufacturers use this test to demonstrate that new or
improved A/C technologies actually result in efficiency improvements.
Since the appropriateness of the test is still being evaluated, EPA
proposes that manufacturers continue to use the menu to determine
credits and fuel consumption improvement values for the GHG and CAFE
programs. This design-based approach would assign CO2 credit
to each efficiency-improving air conditioning technology that the
manufacturer incorporates in a vehicle model. The sum of these values
for all technologies would be the amount of CO2 credit
generated by that vehicle, up to a maximum of 5.0 g/mi for car and 7.2
g/mi for trucks. As stated above, this is equivalent to a fuel
consumption value of 0.000563 gallons/mi for cars and 0.000586 gallons/
mi for trucks. EPA will consult with NHTSA on the amount of fuel
consumption improvement value manufacturers may factor into their CAFE
calculations if there are adjustments that may be required in the
future. Table II-10 presents the proposed CO2 credit and
CAFE fuel consumption improvement values for each of the efficiency-
reducing air conditioning technologies considered in this rule. More
detail is provided on the calculation of indirect A/C CAFE fuel
consumption improvement values in chapter 5 of the TSD. EPA is
proposing very specific definitions of each of the technologies in the
table below which are discussed in Chapter 5 of the draft joint TSD to
ensure that the air conditioner technology used by manufacturers
seeking these credits corresponds with the technology used to derive
the credit/fuel consumption improvement values.
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As mentioned above, EPA, working with manufacturers and CARB, has
made significant progress in developing a more robust test that may
eventually be capable of measuring differences in A/C efficiency. While
EPA believes that more testing and development will be necessary before
the new test could be used directly to quantify efficiency credits and
fuel consumption improvement values, EPA is proposing that the test be
used to demonstrate that new or improved A/C technologies result in
reductions in GHG emissions and fuel consumption. EPA is proposing the
AC17 test as a reporting-only alternative to the Idle Test for MYs
2014-2016, and as a prerequisite for generating Efficiency Credits and
fuel consumption improvement values for MY 2017 and later. To
demonstrate that a vehicle's A/C system is delivering the efficiency
benefits of the new technologies, manufacturers would run the AC17 test
procedure on a vehicle that incorporates the new technologies, with the
A/C system off and then on, and then compare that result to the result
from a previous model year or baseline vehicle with similar vehicle
characteristics, except that the comparison vehicle would not have the
new technologies. If the test result with the new technology
demonstrated an emission reduction that is greater than or equal to the
menu-based credit potential of those technologies, the manufacturer
would generate the appropriate credit based on the menu. However, if
the test result did not demonstrate the full menu-based potential of
the technology, partial credit could still be earned, in proportion to
how far away the result was from the expected menu-based credit amount.
EPA discusses the new test in more detail in Section III.C.1.b
below and in Chapter 5 (5.1.3.5) of the joint TSD. Due to the length of
time to conduct the test procedure, EPA is also proposing that required
testing on the new AC17 test procedure be limited to a subset of
vehicles. The agencies request comment on this approach to establishing
A/C efficiency credits and fuel consumption improvement values and the
use of the new A/C test.
For the CAFE program, EPA is proposing to determine a fleet average
fuel consumption improvement value in a manner consistent with the way
a fleet average CO2 credits will be determined. EPA would
convert the metric tons of CO2 credits for air conditioning,
off-cycle, and full size pick-up to fleet-wide fuel consumption
improvement values, consistent with the way EPA would convert the
improvements in CO2 performance to metric tons of credits.
See discussion in section III. C. There would be separate improvement
values for each type of credit, calculated separately for cars and for
trucks. These improvement values would be subtracted from the
manufacturer's two-cycle-based fleet fuel consumption value to yield a
final new fleet fuel consumption value, which would be inverted to
determine a final fleet fuel CAFE value. EPA considered, but is not
proposing, an approach where the fuel consumption improvement values
would be accounted for at the individual vehicle level. In this case a
credit-adjusted MPG value would have to be calculated for each vehicle
that accrues air conditioning, off-cycle, or pick-up truck credits, and
a credit-adjusted CAFE would be calculated by sales-weighting each
vehicle. EPA found that a significant issue with this approach is that
the credit programs do not align with the way fuel economy and GHG
emissions are currently reported to EPA or to NHTSA, i.e., at the model
type level. Model types are similar in basic engine and transmission
characteristics, but credits are expected to vary within a model type,
possibly considerably. For example, within a model type the credits
could vary by body style, trim level, footprint, and the type of air
conditioning systems and other GHG reduction technologies installed.
Manufacturers would have to report sales volumes for each unique
combination of all of these factors in order to enable EPA to perform
the CAFE averaging calculations. This
[[Page 74941]]
would require a dramatic and expensive overhaul of EPA's data systems,
and the manufacturers would likely face similar impacts. The vehicle-
specific approach would also likely introduce more opportunities for
errors resulting from data entry and rounding, since each vehicle's
base fuel economy would be modified by multiple consumption values
reported to at least six decimal places. The proposed approach would
instead focus on calculating the GHG credits correctly and summing them
for each of the car and truck fleets, and the step of transforming to a
fuel consumption improvement value is relatively straightforward.
However, given that the vehicle-specific and fleet-based approaches
yield the same end result, EPA requests comment on whether one approach
or the other is preferable, and if so, why a specific approach is
preferable.
2. Off-Cycle CO2 Credits
For MYs 2012-2016, EPA provided an option for manufacturers to
generate adjustments (credits) for employing new and innovative
technologies that achieve CO2 reductions which are not
reflected on current 2-cycle test procedures. For this proposal, EPA,
in coordination with NHTSA, is proposing to apply the off-cycle credits
and equivalent fuel consumption improvement values to both the CAFE and
GHG programs. This proposed expansion is a change from the 2012-16
final rule where only EPA provided the off-cycle credits for the GHG
program. For MY 2017 and later, EPA is proposing that manufacturers may
continue to use off-cycle credits for GHG compliance and begin to use
fuel consumption improvement values for CAFE compliance. In addition,
EPA is proposing a set of defined (e.g. default) values for identified
off-cycle technologies that would apply unless the manufacturer
demonstrates to EPA that a different value for its technology is
appropriate.
Starting with MY2008, EPA started employing a ``five-cycle'' test
methodology to measure fuel economy for the fuel economy label.
However, for GHG and CAFE compliance, EPA continues to use the
established ``two-cycle'' (city and highway test cycles, also known as
the FTP and HFET) test methodology. As learned through development of
the ``five-cycle'' methodology and researching this proposal, EPA and
NHTSA recognize that there are technologies that provide real-world GHG
emissions and fuel consumption improvements, but those improvements are
not fully reflected on the ``two-cycle'' test.
During meetings with vehicle manufacturers, EPA received comments
that the approval process for generating off-cycle credits was
complicated and did not provide sufficient certainty on the amount of
credits that might be approved. Commenters also maintained that it is
impractical to measure small incremental improvements on top of a large
tailpipe measurement, similar to comments received related to
quantifying air conditioner improvements. These same manufacturers
believed that such a process could stifle innovation and fuel efficient
technologies from penetrating into the vehicle fleet.
In response to these concerns, EPA is proposing a menu with a
number of technologies that the agency believes will show real-world
CO2 and fuel consumption benefits which can be reasonably
quantified by the agencies at this time. This list of pre-approved
technologies includes a quantified default value that would apply
unless the manufacturer demonstrates to EPA that a different value for
a technology is appropriate. This list is similar to the menu driven
approach described in the previous section on A/C efficiency credits.
The estimates of these credits were largely determined from research,
analysis and simulations, rather from full vehicle testing, which would
have been cost and time prohibitive. These predefined estimates are
somewhat conservative to avoid the potential for windfall. If
manufactures believe their specific off-cycle technology achieves
larger improvement, they may apply for greater credits and fuel
consumption improvement values with supporting data. For technologies
not listed, EPA is proposing a case-by-case approach for approval of
off-cycle credits and fuel consumption improvement values, similar to
the approach in the 2012-2016 rule but with important modifications to
streamline the approval process. EPA will also consult with NHTSA
during the review process. See section III.C below; technologies for
which EPA is proposing default off-cycle credit values and fuel
consumption improvement values are shown in Table II--11 below. Fuel
consumption improvement values under the CAFE program based on off-
cycle technology would be equivalent to the off-cycle credit allowed by
EPA under the GHG program, and these amounts would be determined using
the same procedures and test methods as are proposed for use in EPA's
GHG program.
EPA and NHTSA are not proposing to adjust the stringency of the
standards based on the availability of off-cycle credits and fuel
consumption improvement values. There are a number of reasons for this.
First, the agencies have limited technical information on the cost,
development time necessary, and manufacturability of many of these
technologies. The analysis presented below (and in greater detail in
Chapter 5 of the joint TSD) is limited to quantifying the effectiveness
of the technology (for the purposes of quantifying credits and fuel
consumption improvement values). It is based on a combination of data
and engineering analysis for each technology. Second, for most of these
technologies the agencies have no data on what the rates of penetration
of these technologies would be during the rule timeframe. Thus, with
the exception of active aerodynamic improvements and stop start
technology, the agencies do not have adequate information available to
consider the technologies on the list when determining the appropriate
GHG emissions or CAFE standards. The agencies expect to continue to
improve their understanding of these technologies over time. If further
information is obtained during the comment period that supports
consideration of these technologies in setting the standards, EPA and
NHTSA will reevaluate their positions. However, given the current lack
of detailed information about these technologies, the agencies do not
expect that it will be able to do more for the final rule than estimate
some general amount of reasonable projected cost savings from
generation of off-cycle credits and fuel consumption improvement
values. Therefore, effectively the off-cycle credits and fuel
consumption improvement values allow manufacturers additional
flexibility in selecting technologies that may be used to comply with
GHG emission and CAFE standards.
Two technologies on the list--active aerodynamic improvements and
stop start--are in a different position than the other technologies on
the list. Both of these technologies are included in the agencies'
modeling analysis of technologies projected to be available for use in
achieving the reductions needed for the standards. We have information
on their effectiveness, cost, and availability for purposes of
considering them along with the various other technologies we consider
in determining the appropriate CO2 emissions standard. These
technologies are among those listed in Chapter 3 of the joint TSD and
have measureable benefit on the 2-cycle test. However, in the context
of off-cycle credits and fuel
[[Page 74942]]
consumption improvement values, stop start is any technology which
enables a vehicle to automatically turn off the engine when the vehicle
comes to a rest and restart the engine when the driver applies pressure
to the accelerator or releases the brake. This includes HEVs and PHEVs
(but not EVs). In addition, active grill shutters is just one of
various technologies that can be used as part of aerodynamic design
improvements (as part of the ``aero2'' technology). The modeling and
other analysis developed for determining the appropriate emissions
standard includes these technologies, using the effectiveness values on
the 2-cycle test. This is consistent with our consideration of all of
the other technologies included in these analyses. Including them on
the list for off-cycle credit and fuel consumption improvement value
generation, for purposes of compliance with the standards, would
recognize that these technologies have a higher degree of effectiveness
than reflected in their 2-cycle effectiveness. As discussed in Sections
III.C and Chapter 5 of the joint TSD, the agencies have taken into
account the generation of off-cycle credits and fuel consumption
improvement values by these two technologies in determining the
appropriateness of the proposed standards, considering the amount of
credit and fuel consumption improvement value, the projected degree of
penetration of these technologies, and other factors. The proposed
standards are appropriate recognizing that these technologies would
also generate off-cycle credits and fuel consumption improvement
values. Section III.D has a more detailed discussion on the feasibility
of the standards within the context of the flexibilities (such as off-
cycle credits and fuel consumption improvement values) proposed in this
rule.
For these technologies that provide a benefit on five-cycle
testing, but show less benefit on two cycle testing, in order to
quantify the emissions impacts of these technologies, EPA will simply
subtract the two-cycle benefit from the five-cycle benefit for the
purposes of assigning credit and fuel consumption improvement values
for this pre-approved list. Other technologies, such as more efficient
lighting show no benefit over any test cycle. In these cases, EPA will
estimate the average amount of usage using MOVES \169\ data if possible
and use this to calculate a duty-cycle-weighted benefit (or credit and
fuel consumption improvement value). In the 2012-2016 rule, EPA stated
a technology must have ``real world GHG reductions not significantly
captured on the current 2-cycle tests* * *'' For this proposal, EPA is
proposing to modify this requirement to allow technologies as long as
the incremental benefit in the real-world is significantly better than
on the 2-cycle test. There are environmental benefits to encouraging
these kinds of technologies that might not otherwise be employed,
beyond the level that the 2-cycle standards already do, thus we are now
allowing credits and fuel consumption improvement values to be
generated where the technology achieves an incremental benefit that is
significantly better than on the 2-cycle test, as is the case for the
technologies on the list.
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\169\ MOVES is EPA's MOtor Vehicle Emissions Simulator. This
model contains (in its database) a wide variety of fleet and
activity data as well as national ambient temperature conditions.
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EPA and NHTSA evaluated many more technologies for off-cycle
credits and fuel consumption improvement values and decided that the
following technologies should be eligible for off-cycle credits and
fuel consumption improvement values. These eleven technologies eligible
for credits and fuel consumption improvement values are shown in Table
II-11 below. EPA is proposing that a CAFE improvement value for off-
cycle improvements be determined at the fleet level by converting the
CO2 credits determined under the EPA program (in metric tons
of CO2) for each fleet (car and truck) to a fleet fuel
consumption improvement value. This improvement value would then be
used to adjust the fleet's CAFE level upward. See the proposed
regulations at 40 CFR 600.510-12. Note that while the table below
presents fuel consumption values equivalent to a given CO2
credit value, these consumption values are presented for informational
purposes and are not meant to imply that these values will be used to
determine the fuel economy for individual vehicles.
[[Page 74943]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.041
Table II-11 shows the proposed list of off-cycle technologies and
credits and equivalent fuel consumption improvement values for cars and
trucks. The credits and fuel consumption improvement values for engine
heat recovery and solar roof panels are scalable, depending on the
amount of energy these systems can generate for the vehicle. The Solar/
Thermal control technologies are varied and are limited to 3 and 4.3 g/
mi (car and truck respectively) total.
To ensure that the off cycle technology used by manufacturers
seeking these credits and fuel consumption improvement values
corresponds with the technology used to derive the credit and fuel
consumption improvement values, EPA is proposing very specific
definitions of each of the technologies in the table of the list of
technologies in Chapter 5 of the draft joint TSD. The agencies are
requesting comment on all aspects of the off-cycle credit and fuel
consumption improvement value program, and would welcome any data to
support an adjustment to this table, whether it is to adjust the values
or to add or remove technologies.
Vehicle Simulation Tool
Chapter 2 of the RIA provides a detailed description of the vehicle
simulation tool that EPA has been developing. This tool is capable of
simulating a wide range of conventional and advanced engines,
transmissions, and vehicle technologies over various driving cycles. It
evaluates technology package effectiveness while taking into account
synergy (and dis-synergy) effects among vehicle components and
estimates GHG emissions for various combinations of technologies. For
the 2017 to 2025 GHG proposal, this simulation tool was used to assist
estimating the amount of GHG credits for improved A/C systems and off-
cycle technologies. EPA seeks public comments on this approach of using
the tool for directly generating and fine-tuning some of the credits in
order to capture the amount of GHG reductions provided by primarily
off-cycle technologies.
There are a number of technologies that could bring additional GHG
reductions over the 5-cycle drive test (or in the real world) compared
to the combined FTP/Highway (or two) cycle test. These are called off-
cycle technologies and are described in chapter 5 of the Joint TSD in
detail. Among them are technologies related to reducing vehicle's
electrical loads, such as High Efficiency Exterior Lights, Engine Heat
Recovery, and Solar Roof Panels. In an effort to streamline the process
for approving off-cycle credits, we have set a relatively conservative
estimate of the credit based on our efficacy analysis. EPA seeks
comment on utilizing the model in order to quantify the credits more
accurately, if actual data of electrical load reduction and/or on-board
electricity generation by one or more of these technologies is
available through data submission from manufacturers. Similarly, there
are
[[Page 74944]]
technologies that would provide additional GHG reduction benefits in
the 5-cycle test by actively reducing the vehicle's aerodynamic drag
forces. These are referred to as active aerodynamic technologies, which
include but are not limited to active grill shutters and active
suspension lowering. Like the electrical load reduction technologies,
the vehicle simulation tool can be used to more accurately estimate the
additional GHG reductions (therefore the credits) provided by these
active aerodynamic technologies over the 5-cycle drive test. EPA seeks
comment on using the simulation tool in order to quantify these
credits. In order to do this properly, manufacturers would be expected
to submit two sets of coast-down coefficients (with and without the
active aerodynamic technologies). Or, they could submit two sets of
aerodynamic drag coefficient (with and without the active aerodynamic
technologies) as a function of vehicle speed.
There are other technologies that would result in additional GHG
reduction benefits that cannot be fully captured on the combined FTP/
Highway cycle test. These technologies typically reduce engine loads by
utilizing advanced engine controls, and they range from enabling the
vehicle to turn off the engine at idle, to reducing cabin temperature
and thus A/C compressor loading when the vehicle is restarted. Examples
include Engine Start-Stop, Electric Heater Circulation Pump, Active
Engine/Transmission Warm-Up, and Solar Control. For these types of
technologies, the overall GHG reduction largely depends on the control
and calibration strategies of individual manufacturers and vehicle
types. Also, the current vehicle simulation tool does not have the
capability to properly simulate the vehicle behaviors that depend on
thermal conditions of the vehicle and its surroundings, such as Active
Engine/Transmission Warm-Up and Solar Control. Therefore, the vehicle
simulation may not provide full benefits of the technologies on the GHG
reductions. For this reason, the agency is not proposing to use the
simulation tool to generate the GHG credits for these technologies at
this time, though future versions of the model may be more capable of
quantifying the efficacy of these off-cycle technologies as well.
3. Advanced Technology Incentives for Full Sized Pickup Trucks
The agencies recognize that the standards under consideration for
MY 2017-2025 will be most challenging to large trucks, including full
size pickup trucks that are often used for commercial purposes and have
generally higher payload and towing capabilities, and cargo volumes
than other light-duty vehicles. In Section II.C and Chapter 2 of the
joint TSD, EPA and NHTSA describe the proposal to adjust the slope of
the truck curve compared to the 2012-2016 rule. In Sections III.B and
IV.F, EPA and NHTSA describe the progression of the truck standards. In
this section, the agencies describe a credit and fuel consumption
improvement value for full size pickup trucks to incentivize advanced
technologies on this class of vehicles.
The agencies' goal is to incentivize the penetration into the
marketplace of ``game changing'' technologies for these pickups,
including their hybridization. For that reason, EPA, in coordination
with NHTSA, is proposing credits and corresponding equivalent fuel
consumption improvement values for manufacturers that hybridize a
significant quantity of their full size pickup trucks, or use other
technologies that significantly reduce CO2 emissions and
fuel consumption. This proposed credit and corresponding equivalent
fuel consumption improvement value would be available on a per-vehicle
basis for mild and strong HEVs, as well as other technologies that
significantly improve the efficiency of the full sized pickup
class.\170\ The credits and fuel consumption improvement values would
apply for purposes of compliance with both the GHG emissions standards
and the CAFE standards. This provides the incentive to begin
transforming this most challenging category of vehicles toward use of
the most advanced technologies.
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\170\ Note that EPA's proposed calculation methodology in 40 CFR
600.510-12 does not use vehicle-specific fuel consumption
adjustments to determine the CAFE increase due to the various
incentives allowed under the proposed program. Instead, EPA would
convert the total CO2 credits due to each incentive
program from metric tons of CO2 to a fleetwide CAFE
improvement value. The fuel consumption values are presented to give
the reader some context and explain the relationship between
CO2 and fuel consumption improvements.
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Access to this credit and fuel consumption improvement value is
conditioned on a minimum penetration of the technologies in a
manufacturer's full size pickup truck fleet. To ensure its use for only
full sized pickup trucks, EPA is proposing a very specific definition
for a full sized pickup truck based on minimum bed size and minimum
towing capability. The specifics of this proposed definition can be
found in Chapter 5 of the draft joint TSD (see Section 5.3.1). This
proposed definition is meant to ensure that smaller pickup trucks,
which do not offer the same level of utility (e.g., bed size, towing
capability and/or payload capability) and thus may not face the same
technical challenges to improving fuel economy and reducing
CO2 emissions as compared to full sized pickup trucks, do
not qualify.\171\ For this proposal, a full sized pickup truck would be
defined as meeting requirements 1 and 2, below, as well as either
requirement 3 or 4, below:
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\171\ As discussed in TSD Section 5.3.1, EPA is seeking comment
on expanding the scope of this credit to somewhat smaller pickups,
provided they have the towing and/or hauling capabilities of the
larger full-size trucks.
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1. The vehicle must have an open cargo box with a minimum width
between the wheelhouses of 48 inches measured as the minimum lateral
distance between the limiting interferences (pass-through) of the
wheelhouses. The measurement would exclude the transitional arc, local
protrusions, and depressions or pockets, if present.\172\ An open cargo
box means a vehicle where the cargo bed does not have a permanent roof
or cover. Vehicles sold with detachable covers are considered ``open''
for the purposes of these criteria.
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\172\ This dimension is also known as dimension W202 as defined
in Society of Automotive Engineers Procedure J1100.
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2. Minimum open cargo box length of 60 inches defined by the lesser
of the pickup bed length at the top of the body (defined as the
longitudinal distance from the inside front of the pickup bed to the
inside of the closed endgate; this would be measured at the height of
the top of the open pickup bed along vehicle centerline and the pickup
bed length at the floor) and the pickup bed length at the floor
(defined as the longitudinal distance from the inside front of the
pickup bed to the inside of the closed endgate; this would be measured
at the cargo floor surface along vehicle centerline).\173\
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\173\ The pickup body length at the top of the body is also
known as dimension L506 in Society of Automotive Engineers Procedure
J1100. The pickup body length at the floor is also known as
dimension L505 in Society of Automotive Engineers Procedure J1100.
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3. Minimum Towing Capability--the vehicle must have a GCWR (gross
combined weight rating) minus GVWR (gross vehicle weight rating) value
of at least 5,000 pounds.\174\
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\174\ Gross combined weight rating means the value specified by
the vehicle manufacturer as the maximum weight of a loaded vehicle
and trailer, consistent with good engineering judgment. Gross
vehicle weight rating means the value specified by the vehicle
manufacturer as the maximum design loaded weight of a single
vehicle, consistent with good engineering judgment. Curb weight is
defined in 40 CFR 86.1803, consistent with the provisions of 40 CFR
1037.140.
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[[Page 74945]]
4. Minimum Payload Capability--the vehicle must have a GVWR (gross
vehicle weight rating) minus curb weight value of at least 1,700
pounds.
The technical basis for these proposed definitions is found in
Section III.C below and Chapter 5 of the joint TSD. EPA is proposing
that mild HEV pickup trucks would be eligible for a per-truck 10 g/mi
CO2 credit (equal to a 0.001125 gal/mi fuel consumption
improvement value) during MYs 2017-2021 if the mild HEV technology is
used on a minimum percentage of a company's full sized pickups. That
minimum percentage would be 30 percent of a company's full sized pickup
production in MY 2017 with a ramp up to at least 80 percent of
production in MY 2021.
EPA is also proposing that strong HEV pickup trucks would be
eligible for a per-truck 20 g/mi CO2 credit (equal to a
0.002250 gal/mi fuel consumption improvement value) during MYs 2017-
2025 if the strong HEV technology is used on a minimum percentage of a
company's full sized pickups. That minimum percentage would be 10
percent of a company's full sized pickup production in each year over
the model years 2017-2025.
To ensure that the hybridization technology used by manufacturers
seeking one of these credits and fuel consumption improvement values
meets the intent behind the incentives, EPA is proposing very specific
definitions of what qualifies as a mild and a strong HEV. These
definitions are described in detail in Chapter 5 of the draft joint TSD
(see section 5.3.3).
For similar reasons, EPA is also proposing a performance-based
incentive credit and equivalent fuel consumption improvement value for
full size pickup trucks that achieve an emission level significantly
below the applicable target.\175\ EPA, in coordination with NHTSA,
proposes this credit to be either 10 g/mi CO2 (equivalent to
0.001125 gal/mi for the CAFE program) or 20 g/mi CO2
(equivalent to 0.002250 gal/mi for the CAFE program) for pickups
achieving 15 percent or 20 percent, respectively, better CO2
than their footprint based target in a given model year. Because the
footprint target curve has been adjusted to account for A/C related
credits, the CO2 level to be compared with the target would
also include any A/C related credits generated by the vehicle. Further
details on this performance-based incentive are in Section III.C below
and in Chapter 5 of the draft joint TSD (see Section 5.3.4). The 10 g/
mi (equivalent to 0.001125 gal/mi) performance-based credit and fuel
consumption improvement value would be available for MYs 2017 to 2021
and a vehicle meeting the requirements would receive the credit and
fuel consumption improvement value until MY 2021 unless its
CO2 level increases or fuel economy decreases. The 20 g/mi
CO2 (equivalent to 0.0023 gal/mi fuel consumption
improvement value) performance-based credit would be available for a
maximum of 5 years within the model years of 2017 to 2025, provided its
CO2 level and fuel consumption does not increase. The
rationale for these limits is because of the year over year progression
of the stringency of the truck target curves. The credits and fuel
consumption improvement values would begin in the model year of
introduction, and could not extend past MY 2021 for the 10 g/mi credit
(equivalent to 0.001125 gal/mi) and MY 2025 for the 20 g/mi credit
(equivalent to 0.002250 gal/mi).
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\175\ The 15 and 20 percent thresholds would be based on
CO2 performance compared to the applicable CO2
vehicle target for both CO2 credits and corresponding
CAFE fuel consumption improvement values. As with A/C and off-cycle
credits, EPA would convert the total CO2 credits due to
the pick-up incentive program from metric tons of CO2 to
a fleetwide equivalent CAFE improvement value.
---------------------------------------------------------------------------
As with the HEV-based credit and fuel consumption improvement
value, the performance-based credit and fuel consumption improvement
value requires that the technology be used on a minimum percentage of a
manufacturer's full-size pickup trucks. That minimum percentage for the
10 g/mi GHG credit (equivalent to 0.001125 gal/mi fuel consumption
improvement value) would be 15 percent of a company's full sized pickup
production in MY 2017 with a ramp up to at least 40 percent of
production in MY 2021. The minimum percentage for the 20 g/mi credit
(equivalent to 0.002250 gal/mi fuel consumption improvement value)
would be 10 percent of a company's full sized pickup production in each
year over the model years 2017-2025.
Importantly, the same vehicle could not receive credit and fuel
consumption improvement under both the HEV and the performance-based
approaches. EPA and NHTSA request comment on all aspects of this
proposed pickup truck incentive credit and fuel consumption improvement
value, including the proposed definitions for full sized pickup truck
and mild and strong HEV.
G. Safety Considerations in Establishing CAFE/GHG Standards
1. Why do the agencies consider safety?
The primary goals of the proposed CAFE and GHG standards are to
reduce fuel consumption and GHG emissions from the on-road light-duty
vehicle fleet, but in addition to these intended effects, the agencies
also consider the potential of the standards to affect vehicle
safety.\176\ As a safety agency, NHTSA has long considered the
potential for adverse safety consequences when establishing CAFE
standards,\177\ and under the CAA, EPA considers factors related to
public health and human welfare, and safety, in regulating emissions of
air pollutants from mobile sources.\178\ Safety trade-offs associated
with fuel economy increases have occurred in the past (particularly
before NHTSA CAFE standards were attribute-based), and the agencies
must be mindful of the possibility of future ones. These past safety
trade-offs may have occurred because manufacturers chose, at the time,
to build smaller and lighter vehicles--partly in response to CAFE
standards--rather than adding more expensive fuel-saving technologies
(and maintaining vehicle size and safety), and the smaller and lighter
vehicles did not fare as well in crashes as larger and heavier
vehicles. Historically, as shown in FARS data analyzed by NHTSA, the
safest cars generally have been heavy and large, while the cars with
the highest fatal-crash rates have been light and small. The question,
then, is whether past is necessarily prologue when it comes to
potential changes in vehicle size (both footprint and ``overhang'') and
mass in response to these proposed future CAFE and GHG standards.
Manufacturers have stated that they will reduce vehicle mass as one of
the cost-effective means of increasing fuel economy and reducing
CO2 emissions in order to meet the proposed standards, and
the
[[Page 74946]]
agencies have incorporated this expectation into our modeling analysis
supporting the proposed standards. Because the agencies discern a
historical relationship between vehicle mass, size, and safety, it is
reasonable to assume that these relationships will continue in the
future. The question of whether vehicle design can mitigate the adverse
effects of mass reduction is discussed below.
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\176\ In this rulemaking document, ``vehicle safety'' is defined
as societal fatality rates per vehicle miles traveled (VMT), which
include fatalities to occupants of all the vehicles involved in the
collisions, plus any pedestrians.
\177\ This practice is recognized approvingly in case law. As
the United States Court of Appeals for the DC Circuit stated in
upholding NHTSA's exercise of judgment in setting the 1987-1989
passenger car standards, ``NHTSA has always examined the safety
consequences of the CAFE standards in its overall consideration of
relevant factors since its earliest rulemaking under the CAFE
program.'' Competitive Enterprise Institute v. NHTSA (``CEI I''),
901 F.2d 107, 120 at n. 11 (DC Cir. 1990).
\178\ See NRDC v. EPA, 655 F. 2d 318, 332 n. 31 (DC Cir. 1981).
(EPA may consider safety in developing standards under section 202
(a) and did so appropriately in the given instance).
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Manufacturers are less likely than they were in the past to reduce
vehicle footprint in order to reduce mass for increased fuel economy.
The primary mechanism in this rulemaking for mitigating the potential
negative effects on safety is the application of footprint-based
standards, which create a disincentive for manufacturers to produce
smaller-footprint vehicles. See section II. C.1, above. This is
because, as footprint decreases, the corresponding fuel economy/GHG
emission target becomes more stringent. We also believe that the shape
of the footprint curves themselves is approximately ``footprint-
neutral,'' that is, that it should neither encourage manufacturers to
increase the footprint of their fleets, nor to decrease it. Upsizing
footprint is also discouraged through the curve ``cut-off'' at larger
footprints.\179\ However, the footprint-based standards do not
discourage downsizing the portions of a vehicle in front of the front
axle and to the rear of the rear axle, or of other areas of the vehicle
outside the wheels. The crush space provided by those portions of a
vehicle can make important contributions to managing crash energy.
Additionally, simply because footprint-based standards create no
incentive to downsize vehicles does not mean that manufacturers will
not downsize if doing so makes it easier to meet the overall CAFE/GHG
standard, as for example if the smaller vehicles are so much lighter
that they exceed their targets by much greater amounts. On balance,
however, we believe the target curves and the incentives they provide
generally will not encourage down-sizing (or up-sizing) in terms of
footprint reductions (or increases).\180\ Consequently, all of our
analyses are based on the assumption that this rulemaking, in and of
itself, will not result in any differences in the sales weighted
distribution of vehicle sizes.
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\179\ The agencies recognize that at the other end of the curve,
manufacturers who make small cars and trucks below 41 square feet
(the small footprint cut-off point) have some incentive to downsize
their vehicles to make it easier to meet the constant target. That
cut-off may also create some incentive for manufacturers who do not
currently offer models that size to do so in the future. However, at
the same time, the agencies believe that there is a limit to the
market for cars and trucks smaller than 41 square feet: most
consumers likely have some minimum expectation about interior
volume, for example, among other things. Additionally, vehicles in
this segment are the lowest price point for the light-duty
automotive market, with several models in the $10,000-$15,000 range.
Manufacturers who find themselves incentivized by the cut-off will
also find themselves adding technology to the lowest price segment
vehicles, which could make it challenging to retain the price
advantage. Because of these two reasons, the agencies believe that
the incentive to increase the sales of vehicles smaller than 41
square feet due to this rulemaking, if any, is small. See Section
II.C.1 above and Chapter 1 of the draft Joint TSD for more
information on the agencies' choice of ``cut-off'' points for the
footprint-based target curves.
\180\ This statement makes no prediction of how consumer choices
of vehicle size will change in the future, independent of this
proposal.
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Given that we expect manufacturers to reduce vehicle mass in
response to the proposed standards, and do not expect manufacturers to
reduce vehicle footprint in response to the proposed standards, the
agencies must attempt to predict the safety effects, if any, of the
proposed standards based on the best information currently available.
This section explained why the agencies consider safety; the following
section discusses how the agencies consider safety.
2. How do the agencies consider safety?
Assessing the effects of vehicle mass reduction and size on
societal safety is a complex issue. One part of estimating potential
safety effects involves trying to understand better the relationship
between mass and vehicle design. The extent of mass reduction that
manufacturers may be considering to meet more stringent fuel economy
and GHG standards may raise different safety concerns from what the
industry has previously faced. The principal difference between the
heavier vehicles, especially truck-based LTVs, and the lighter
vehicles, especially passenger cars, is that mass reduction has a
different effect in collisions with another car or LTV. When two
vehicles of unequal mass collide, the change in velocity (delta V) is
higher in the lighter vehicle, similar to the mass ratio proportion. As
a result of the higher change in velocity, the fatality risk may also
increase. Removing more mass from the heavier vehicle than in the
lighter vehicle by amounts that bring the mass ratio closer to 1.0
reduces the delta V in the lighter vehicle, possibly resulting in a net
societal benefit.
Another complexity is that if a vehicle is made lighter,
adjustments must be made to the vehicle's structure such that it will
be able to manage the energy in a crash while limiting intrusion into
the occupant compartment after adopting materials that may be stiffer.
To maintain an acceptable occupant compartment deceleration, the
effective front end stiffness has to be managed such that the crash
pulse does not increase as stiffer yet lighter materials are utilized.
If the energy is not well managed, the occupants may have to ``ride
down'' a more severe crash pulse, putting more burdens on the restraint
systems to protect the occupants. There may be technological and
physical limitations to how much the restraint system may mitigate
these effects.
The agencies must attempt to estimate now, based on the best
information currently available to us, how the assumed levels of mass
reduction without additional changes (i.e. footprint, performance,
functionality) might affect the safety of vehicles, and how lighter
vehicles might affect the safety of drivers and passengers in the
entire on-road fleet, as we are analyzing potential future CAFE and GHG
standards. The agencies seek to ensure that the standards are designed
to encourage manufacturers to pursue a path toward compliance that is
both cost-effective and safe.
To estimate the possible safety effects of the MY 2017-2025
standards, then, the agencies have undertaken research that approaches
this question from several angles. First, we are using a statistical
approach to study the effect of vehicle mass reduction on safety
historically, as discussed in greater detail in section C below.
Statistical analysis is performed using the most recent historical
crash data available, and is considered as the agencies' best estimate
of potential mass-safety effects. The agencies recognize that negative
safety effects estimated based on the historical relationships could
potentially be tempered with safety technology advances in the future,
and may not represent the current or future fleet. Second, we are using
an engineering approach to investigate what amount of mass reduction is
affordable and feasible while maintaining vehicle safety and other
major functionalities such as NVH and acceleration performance. Third,
we are also studying the new challenges these lighter vehicles might
bring to vehicle safety and potential countermeasures available to
manage those challenges effectively.
The sections below discuss more specifically the state of the
research on the mass-safety relationship, and how the agencies
integrate that research into our assessment of the potential safety
effects of the MY 2017-2025 CAFE and GHG standards.
[[Page 74947]]
3. What is the current state of the research on statistical analysis of
historical crash data?
a. Background
Researchers have been using statistical analysis to examine the
relationship of vehicle mass and safety in historical crash data for
many years, and continue to refine their techniques over time. In the
MY 2012-2016 final rule, the agencies stated that we would conduct
further study and research into the interaction of mass, size and
safety to assist future rulemakings, and start to work collaboratively
by developing an interagency working group between NHTSA, EPA, DOE, and
CARB to evaluate all aspects of mass, size and safety. The team would
seek to coordinate government supported studies and independent
research, to the greatest extent possible, to help ensure the work is
complementary to previous and ongoing research and to guide further
research in this area.
The agencies also identified three specific areas to direct
research in preparation for future CAFE/GHG rulemaking in regards to
statistical analysis of historical data.
First, NHTSA would contract with an independent institution to
review the statistical methods that NHTSA and DRI have used to analyze
historical data related to mass, size and safety, and to provide
recommendation on whether the existing methods or other methods should
be used for future statistical analysis of historical data. This study
will include a consideration of potential near multicollinearity in the
historical data and how best to address it in a regression analysis.
The 2010 NHTSA report was also peer reviewed by two other experts in
the safety field--Charles Farmer (Insurance Institute for Highway
Safety) and Anders Lie (Swedish Transport Administration).\181\
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\181\ All three of the peer reviews are in docket, NHTSA-2010-
0152. You can access the docket at http://www.regulations.gov/#!home
by typing `NHTSA-2010-0152' where it says ``enter keyword or ID''
and then clicking on ``Search.''
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Second, NHTSA and EPA, in consultation with DOE, would update the
MYs 1991-1999 database on which the safety analyses in the NPRM and
final rule are based with newer vehicle data, and create a common
database that could be made publicly available to help address concerns
that differences in data were leading to different results in
statistical analyses by different researchers.
And third, in order to assess if the design of recent model year
vehicles that incorporate various mass reduction methods affect the
relationships among vehicle mass, size and safety, the agencies sought
to identify vehicles that are using material substitution and smart
design, and to try to assess if there is sufficient crash data
involving those vehicles for statistical analysis. If sufficient data
exists, statistical analysis would be conducted to compare the
relationship among mass, size and safety of these smart design vehicles
to vehicles of similar size and mass with more traditional designs.
Significant progress has been made on these tasks since the MY
2012-2016 final rule, as follows: The independent review of recent and
updated statistical analyses of the relationship between vehicle mass,
size, and crash fatality rates has been completed. NHTSA contracted
with the University of Michigan Transportation Research Institute
(UMTRI) to conduct this review, and the UMTRI team led by Paul Green
evaluated over 20 papers, including studies done by NHTSA's Charles
Kahane, Tom Wenzel of the US Department of Energy's Lawrence Berkeley
National Laboratory, Dynamic Research, Inc., and others. UMTRI's basic
findings will be discussed below. Some commenters in recent CAFE
rulemakings, including some vehicle manufacturers, suggested that the
designs and materials of more recent model year vehicles may have
weakened the historical statistical relationships between mass, size,
and safety. The agencies agree that the statistical analysis would be
improved by using an updated database that reflects more recent safety
technologies, vehicle designs and materials, and reflects changes in
the overall vehicle fleet. The agencies also believe, as UMTRI also
found, that different statistical analyses may have had different
results because they each used slightly different datasets for their
analyses. In order to try to mitigate this problem and to support the
current rulemaking, NHTSA has created a common, updated database for
statistical analysis that consists of crash data of model years 2000-
2007 vehicles in calendar years 2002-2008, as compared to the database
used in prior NHTSA analyses which was based on model years 1991-1999
vehicles in calendar years 1995-2000. The new database is the most up-
to-date possible, given the processing lead time for crash data and the
need for enough crash cases to permit statistically meaningful
analyses. NHTSA has made the new databases available to the
public,\182\ enabling other researchers to analyze the same data and
hopefully minimizing discrepancies in the results that would have been
due to inconsistencies across databases.\183\ The agencies recognize,
however, that the updated database may not represent the future fleet,
because vehicles have continued and will continue to change.
---------------------------------------------------------------------------
\182\ The new databases are available at http://www.nhtsa.gov/fuel-economy (look for ``Download Crash Databases for Statistical
Analysis of Relationships Between Vehicles' Fatality Risk, Mass, and
Footprint.''
\183\ 75 Fed. Reg. 25324 (May 7, 2010); the discussion of
planned statistical analyses is on pp. 25395-25396.
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The agencies are aware that several studies have been initiated
using NHTSA's 2011 newly established safety database. In addition to a
new Kahane study, which is discussed in section II.G.4, other on-going
studies include two by Wenzel at Lawrence Berkeley National Laboratory
(LBNL) under contract with the U.S. DOE, and one by Dynamic Research,
Inc. (DRI) contracted by the International Council on Clean
Transportation (ICCT). These studies may take somewhat different
approaches to examine the statistical relationship between fatality
risk, vehicle mass and size. In addition to a detailed assessment of
the NHTSA 2011 report, Wenzel is expected to consider the effect of
mass and footprint reduction on casualty risk per crash, using data
from thirteen states. Casualty risk includes both fatalities and
serious or incapacitating injuries. DRI is expected to use a two-stage
approach to separate the effect of mass reduction on two components of
fatality risk, crash avoidance and crashworthiness. The LBNL assessment
of the NHTSA 2011 report is available in the docket for this NPRM.\184\
The casualty risk effect study was not available in time to inform this
NPRM. The completed final peer reviewed-report on both assessments will
be available prior to the final rule. DRI has also indicated that it
expects its study to be publicly available prior to the final rule. The
agencies will consider these studies and any others that become
available, and the results may influence the safety analysis for the
final rule.
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\184\ Wenzel, T.P. (2011b). Assessment of NHTSA's Report
``Relationships between Fatality Risk, Mass, and Footprint in Model
Year 2000-2007 Passenger Cars and LTVs'', available at[hellip]
---------------------------------------------------------------------------
Other researchers are free to download the database from NHTSA's
Web site, and we expect to see additional papers in the coming months
and as comments to the rulemaking that may also inform our
consideration of these issues for the final rule. Kahane's updated
study for 2011 is currently undergoing peer-review, and is available
[[Page 74948]]
in the docket for this rulemaking for review by commenters.
Finally, EPA and NHTSA with DOT's Volpe Center, part of the
Research and Innovative Technology Administration (RITA), attempted to
investigate the implications of ``Smart Design,'' by identifying and
describing the types of ``Smart Design'' and methods for using ``Smart
Design'' to result in vehicle mass reduction, selecting analytical
pairs of vehicles, and using the appropriate crash database to analyze
vehicle crash data. The analysis identified several one-vehicle and
two-vehicle crash datasets with the potential to shed light on the
issue, but the available data for specific crash scenarios was
insufficient to produce consistent results that could be used to
support conclusions regarding historical performance of ``smart
designs.''
Undertaking these tasks has helped the agencies come closer to
resolving some of the ongoing debates in statistical analysis research
of historical crash data. We intend to apply these conclusions going
forward, and we believe that the public discussion of the issues will
be facilitated by the research conducted. The following sections
discuss the findings from these studies and others in greater detail,
to present a more nuanced picture of the current state of the
statistical research.
b. NHTSA Workshop on Vehicle Mass, Size and Safety
On February 25, 2011, NHTSA hosted a workshop on mass reduction,
vehicle size, and fleet safety at the Headquarters of the U.S.
Department of Transportation in Washington, DC.\185\ The purpose of the
workshop was to provide the agencies with a broad understanding of
current research in the field and provide stakeholders and the public
with an opportunity to weigh in on this issue. NHTSA also created a
public docket to receive comments from interested parties that were
unable to attend.
---------------------------------------------------------------------------
\185\ A video recording, transcript, and the presentations from
the NHTSA workshop on mass reduction, vehicle size and fleet safety
is available at http://www.nhtsa.gov/fuel-economy (look for ``NHTSA
Workshop on Vehicle Mass-Size-Safety on Feb. 25'')
---------------------------------------------------------------------------
The speakers included Charles Kahane of NHTSA, Tom Wenzel of
Lawrence Berkeley National Laboratory, R. Michael Van Auken of Dynamic
Research Inc. (DRI), Jeya Padmanaban of JP Research, Inc., Adrian Lund
of the Insurance Institute for Highway Safety, Paul Green of the
University of Michigan Transportation Research Institute (UMTRI),
Stephen Summers of NHTSA, Gregg Peterson of Lotus Engineering, Koichi
Kamiji of Honda, John German of the International Council on Clean
Transportation (ICCT), Scott Schmidt of the Alliance of Automobile
Manufacturers, Guy Nusholtz of Chrysler, and Frank Field of the
Massachusetts Institute of Technology.
The wide participation in the workshop allowed the agencies to hear
from a broad range of experts and stakeholders. The contributions were
particularly relevant to the agencies' analysis of the effects of
weight reduction for this proposed rule. The presentations were divided
into two sessions that addressed the two expansive sets of issues--
statistical evidence of the roles of mass and size on safety, and
engineering realities--structural crashworthiness, occupant injury and
advanced vehicle design.
The first session focused on previous and ongoing statistical
studies of crash data that attempt to identify the relative effects of
vehicle mass and size on fleet safety. There was consensus that there
is a complicated relationship with many confounding influences in the
data. Wenzel summarized a recent study he conducted comparing four
types of risk (fatality or casualty risk, per vehicle registration-
years or per crash) using police-reported crash data from five
states.\186\ He showed that the trends in risk for various classes of
vehicles (e.g., non-sports car passenger cars, vans, SUVs, crossover
SUVs, pickups) were similar regardless of what risk was being measured
(fatality or casualty) or what exposure metric was used (e.g.,
registration years, police-reported crashes, etc.). In general, most
trends showed a lower risk for drivers of larger, heavier vehicles.
---------------------------------------------------------------------------
\186\ Wenzel, T.P. (2011a). Analysis of Casualty Risk per
Police-Reported Crash for Model Year 2000 to 2004 Vehicles, using
Crash Data from Five States, March 2011, LBNL-4897E, available at:
http://eetd.lbl.gov/EA/teepa/pub.html#Vehicle
---------------------------------------------------------------------------
Although Wenzel's analysis was focused on differences in the four
types of risk on the relative risk by vehicle type, he cautioned that,
when analyzing casualty risk per crash, analysts should control for
driver age and gender, crash location (urban vs. rural), and the state
in which the crash occurred (to account for crash reporting biases).
Several participants pointed out that analyses must also control
for individual technologies with significant safety effects (e.g.,
Electronic Stability Control, airbags).It was not always conclusive
whether a specialty vehicle group (e.g., sports cars, two-door cars,
early crossover SUVs) were outliers that confound the trend or unique
datasets that isolate specific vehicle characteristics. Unfortunately,
specialty vehicle groups are usually adopted by specific driver groups,
often with outlying vehicle usage or driver behavior patterns. Green,
who conducted an independent review of the previous statistical
analyses, suggested that evaluating residuals will give an indication
of whether or not a data subset can be legitimately removed without
inappropriately affecting the analytical results.
It was recognized that the physics of a two-vehicle crash require
that the lighter vehicle experience a greater change in velocity, which
often leads to disproportionately more injury risk. Lund noted
persistent historical trends that, in any time period, occupants of the
smallest and lightest vehicles had, on average, fatality rates
approximately twice those of occupants of the largest and heaviest
vehicles but predicted ``the sky will not fall'' as the fleet
downsizes, we will not see an increase in absolute injury risk because
smaller cars will become increasingly protective of their occupants.
Padmanaban also noted in her research of the historical trends that
mass ratio and vehicle stiffness are significant predictors with mass
ratio consistently the dominant parameter when correlating harm.
Reducing the mass of any vehicle may have competing societal effects as
it increases the injury risk in the lightened vehicle and decreases
them in the partner vehicle
The separation of key parameters was also discussed as a challenge
to the analyses, as vehicle size has historically been highly
correlated with vehicle mass. Presenters had varying approaches for
dealing with the potential multicollinearity between these two
variables. Van Auken of DRI stated that there was latitude in the value
of Variance Inflation Factor (VIF, a measure of multicollinearity) that
would call results into question, and suggested that the large value of
VIF for curb weight might imply ``perhaps the effect of weight is too
small in comparison to other factors.'' Green, of UMTRI, stated that
highly correlated variables may not be appropriate for use in a
predictive model and that ``match[ing] on footprint'' (i.e., conducting
multiple analyses for data subsets with similar footprint values) may
be the most effective way to resolve the issue.
There was no consensus on the overall effect of the maneuverability
of smaller, lighter vehicles. German noted that lighter vehicles should
have improved handling and braking characteristics and ``may be more
likely to avoid collisions''. Lund presented
[[Page 74949]]
crash involvement data that implied that, among vehicles of similar
function and use rates, crash risk does not go down for more ``nimble''
vehicles. Several presenters noted the difficulties of projecting past
data into the future as new technologies will be used that were not
available when the data were collected. The advances in technology
through the decades have dramatically improved safety for all weight
and size classes. A video of IIHS's 50th anniversary crash test of a
1959 Chevrolet Bel Air and 2009 Chevrolet Malibu graphically
demonstrated that stark differences in design and technology that can
possibly mask the discrete mass effects, while videos of compatibility
crash tests between smaller, lighter vehicles and contemporary larger,
heavier vehicles graphically showed the significance of vehicle mass
and size.
Kahane presented results from his 2010 report\187\ that found that
a scenario which took some mass out of heavier vehicles but little or
no mass out of the lightest vehicles did not impact safety in absolute
terms. Kahane noted that if the analyses were able to consider the mass
of both vehicles in a two-vehicle crash, the results may be more
indicative of future crashes. There is apparent consistency with other
presentations (e.g., Padmanaban, Nusholtz) that reducing the overall
ranges of masses and mass ratios seems to reduce overall societal harm.
That is, the effect of mass reduction exclusively does not appear to be
a ``zero sum game'' in which any increase in harm to occupants of the
lightened vehicle is precisely offset by a decrease in harm to the
occupants of the partner vehicle. If the mass of the heavier vehicle is
reduced by a larger percentage, the changes in velocity from the
collision are more nearly equal and the injuries suffered in the
lighter vehicle are likely to be reduced more than the injuries in the
heavier vehicle are increased. Alternatively, a fixed mass reduction
(say, 100 lbs) in all vehicles could increase societal harm whereas a
fixed percentage mass reduction is more likely to be neutral.
---------------------------------------------------------------------------
\187\ Kahane, C. J. (2010). ``Relationships Between Fatality
Risk, Mass, and Footprint in Model Year 1991-1999 and Other
Passenger Cars and LTVs,'' Final Regulatory Impact Analysis:
Corporate Average Fuel Economy for MY 2012-MY 2016 Passenger Cars
and Light Trucks. Washington, DC: National Highway Traffic Safety
Administration, pp. 464-542, available at http://www.nhtsa.gov/staticfiles/rulemaking/pdf/cafe/CAFE_2012-2016_FRIA_04012010.pdf.
---------------------------------------------------------------------------
Padmanaban described a series of studies conducted in recent years.
She included numerous vehicle parameters including bumper height and
several measures of vehicle size and stiffness and also commented on
previous analyses that using weight and wheelbase together in a
logistic model distorts the estimates, resulting in inflated variance
with wrong signs and magnitudes in the results. Her results
consistently showed that vehicle mass ratio was a more important
parameter than those describing vehicle geometry or stiffness. Her
ultimate conclusion was that removing mass (e.g., 100 lbs.) from all
passenger cars would cause an overall increase in fatalities in truck-
to-car crashes while removing the same amount from light trucks would
cause an overall decrease in fatalities.
c. Report by Green et al., UMTRI--``Independent Review: Statistical
Analyses of Relationship Between Vehicle Curb Weight, Track Width,
Wheelbase and Fatality Rates,'' April 2011.
As explained above, NHTSA contracted with the University of
Michigan Transportation Research Institute (UMTRI) to conduct an
independent review ;\188\ of a set of statistical analyses of
relationships between vehicle curb weight, the footprint variables
(track width, wheelbase) and fatality rates from vehicle crashes. The
purpose of this review was to examine analysis methods, data sources,
and assumptions of the statistical studies, with the objective of
identifying the reasons for any differences in results. Another
objective was to examine the suitability of the various methods for
estimating the fatality risks of future vehicles.
---------------------------------------------------------------------------
\188\ The review is independent in the sense that it was
conducted by an outside third party without any interest in the
reported outcome.
---------------------------------------------------------------------------
UMTRI reviewed a set of papers, reports, and manuscripts provided
by NHTSA (listed in Appendix A of UMTRI's report, which is available in
the docket to this rulemaking) that examined the statistical
relationships between fatality or casualty rates and vehicle properties
such as curb weight, track width, wheelbase and other variables.
It is difficult to summarize a study of that length and complexity
for purposes of this discussion, but fundamentally, the UMTRI team
concluded the following:
Differences in data may have complicated comparisons of
earlier analyses, but if the methodology is robust, and the methods
were applied in a similar way, small changes in data should not lead to
different conclusions. The main conclusions and findings should be
reproducible. The data base created by Kahane appears to be an
impressive collection of files from appropriate sources and the best
ones available for answering the research questions considered in this
study.
In statistical analysis simpler models generally lead to
improved inference, assuming the data and model assumptions are
appropriate. In that regard, the disaggregate logistic regression model
used by NHTSA in the 2003 report \189\ seems to be the most appropriate
model, and valid for the analysis in the context that it was used:
finding general associations between fatality risk and mass--and the
general directions of the reported associations are correct.
---------------------------------------------------------------------------
\189\
---------------------------------------------------------------------------
The two-stage logistic regression model in combination
with the two-step aggregate regression used by DRI seems to be more
complicated than is necessary based on the data being analyzed, and
summing regression coefficients from two separate models to arrive at
conclusions about the effects of reductions in weight or size on
fatality risk seems to add unneeded complexity to the problem.
One of the biggest issues regarding this work is the
historical correlation between curb weight, wheelbase, and track width.
Including three variables that are highly correlated in the same model
can have adverse effects on the fit of the model, especially with
respect to the parameter estimates, as discussed by Kahane. UMTRI makes
no conclusions about multicollinearity, other than to say that
inferences made in the presence of multicollinearity should be judged
with great caution. At the NHTSA workshop on size, safety and mass,
Paul Green suggested that a matched analysis, in which regressions are
run on the relationship between mass reduction and risk separately for
vehicles of similar footprint, could be undertaken to investigate the
effect of multicollinearity between vehicle mass and size. Kahane has
combined wheelbase and track width into one variable (footprint) to
compare with curb weight. NHTSA believes that the 2011 Kahane analysis
has done all it can to lessen concerns about multicollinearity, but a
concern still exists. In considering other studies provided by NHTSA
for evaluation by the UMTRI team:
[cir] Papers by Wenzel, and Wenzel and Ross, addressing
associations between fatality risk per vehicle registration-year,
weight, and size by vehicle model contribute to understanding some of
the relationships between risk, weight, and size. However, least
squares linear regression models, without
[[Page 74950]]
modification, are not exposure-based risk models and inference drawn
from these models tends to be weak since they do not account for
additional differences in vehicles, drivers, or crash conditions that
could explain the variance in risk by vehicle model.
[cir] A 2009 J.P. Research paper focused on the difficulties
associated with separating out the contributions of weight and size
variables when analyzing fatality risk properly recognized the problem
arising from multicollinearity and included a clear explanation of why
fatality risk is expected to increase with increasing mass ratio. UMTRI
concluded that the increases in fatality risk associated with a 100-
pound reduction in weight allowing footprint to vary with weight as
estimated by Kahane and JP Research, are broadly more convincing than
the 6.7 percent reduction in fatality risk associated with mass
reduction while holding footprint constant, as reported by DRI.
[cir] A paper by Nusholtz et al. focused on the question of whether
vehicle size can reasonably be the dominant vehicle factor for fatality
risk, and finding that changing the mean mass of the vehicle population
(leaving variability unchanged) has a stronger influence on fatality
risk than corresponding (feasible) changes in mean vehicle dimensions,
concluded unequivocally that reducing vehicle mass while maintaining
constant vehicle dimensions will increase fatality risk. UMTRI
concluded that if one accepts the methodology, this conclusion is
robust against realistic changes that may be made in the force vs.
deflection characteristics of the impacting vehicles.
[cir] Two papers by Robertson, one a commentary paper and the other
a peer-reviewed journal article, were reviewed. The commentary paper
did not fit separate models according to crash type, and included
passenger cars, vans, and SUVs in the same model. UMTRI concluded that
some of the claims in the commentary paper appear to be overstated, and
intermediate results and more documentation would help the reader
determine if these claims are valid. The second paper focused largely
on the effects of electronic stability control (ESC), but generally
followed on from the first paper except that curb weight is not fit and
fuel economy is used as a surrogate.
The UMTRI study provided a number of useful suggestions that Kahane
considered in updating his 2011 analysis, and that have been
incorporated into the safety effects estimates for the current
rulemaking.
d. Report by Dr. Charles Kahane, NHTSA--``Relationships Between
Fatality Risk, Mass, and Footprint in Model Year 2000-2007 Passenger
Cars and LTVs,'' 2011
The relationship between a vehicle's mass, size, and fatality risk
is complex, and it varies in different types of crashes. NHTSA, along
with others, has been examining this relationship for over a decade.
The safety chapter of NHTSA's April 2010 final regulatory impact
analysis (FRIA) of CAFE standards for MY 2012-2016 passenger cars and
light trucks included a statistical analysis of relationships between
fatality risk, mass, and footprint in MY 1991-1999 passenger cars and
LTVs (light trucks and vans), based on calendar year (CY) 1995-2000
crash and vehicle-registration data.\190\ The 2010 analysis used the
same data as the 2003 analysis, but included vehicle mass and footprint
in the same regression model.
---------------------------------------------------------------------------
\190\ Kahane, C. J. (2010). ``Relationships Between Fatality
Risk, Mass, and Footprint in Model Year 1991-1999 and Other
Passenger Cars and LTVs,'' Final Regulatory Impact Analysis:
Corporate Average Fuel Economy for MY 2012-MY 2016 Passenger Cars
and Light Trucks. Washington, DC: National Highway Traffic Safety
Administration, pp. 464-542, available at http://www.nhtsa.gov/staticfiles/rulemaking/pdf/cafe/CAFE_2012-2016_FRIA_04012010.pdf.
---------------------------------------------------------------------------
The principal findings of NHTSA's 2010 analysis were that mass
reduction in lighter cars, even while holding footprint constant, would
significantly increase societal fatality risk, whereas mass reduction
in the heavier LTVs would significantly reduce net societal fatality
risk, because it would reduce the fatality risk of occupants in lighter
vehicles which collide with the heavier LTVs. NHTSA concluded that, as
a result, any reasonable combination of mass reductions while holding
footprint constant in MY 2012-2016 vehicles--concentrated, at least to
some extent, in the heavier LTVs and limited in the lighter cars--would
likely be approximately safety-neutral; it would not significantly
increase fatalities and might well decrease them.
NHTSA's 2010 report partially agreed and partially disagreed with
analyses published during 2003-2005 by Dynamic Research, Inc. (DRI).
NHTSA and DRI both found a significant protective effect for footprint,
and that reducing mass and footprint together (downsizing) on smaller
vehicles was harmful. DRI's analyses estimated a significant overall
reduction in fatalities from mass reduction in all light-duty vehicles
if wheelbase and track width were maintained, whereas NHTSA's report
showed overall fatality reductions only in the heavier LTVs, and
benefits only in some types of crashes for other vehicle types. Much of
NHTSA's 2010 report, as well as recent work by DRI, involved
sensitivity tests on the databases and models, which generated a range
of estimates somewhere between the initial DRI and NHTSA results.\191\
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\191\ Van Auken, R. M., and Zellner, J. W. (2003). A Further
Assessment of the Effects of Vehicle Weight and Size Parameters on
Fatality Risk in Model Year 1985-98 Passenger Cars and 1986-97 Light
Trucks. Report No. DRI-TR-03-01. Torrance, CA: Dynamic Research,
Inc.; Van Auken, R. M., and Zellner, J. W. (2005a). An Assessment of
the Effects of Vehicle Weight and Size on Fatality Risk in 1985 to
1998 Model Year Passenger Cars and 1985 to 1997 Model Year Light
Trucks and Vans. Paper No. 2005-01-1354. Warrendale, PA: Society of
Automotive Engineers; Van Auken, R. M., and Zellner, J. W. (2005b).
Supplemental Results on the Independent Effects of Curb Weight,
Wheelbase, and Track on Fatality Risk in 1985-1998 Model Year
Passenger Cars and 1986-97 Model Year LTVs. Report No. DRI-TR-05-01.
Torrance, CA: Dynamic Research, Inc.; Van Auken, R.M., and Zellner,
J. W. (2011). ``Updated Analysis of the Effects of Passenger Vehicle
Size and Weight on Safety,'' NHTSA Workshop on Vehicle Mass-Size-
Safety, Washington, February 25, 2011, http://www.nhtsa.gov/staticfiles/rulemaking/pdf/MSS/MSSworkshop_VanAuken.pdf
---------------------------------------------------------------------------
Immediately after issuing the final rule for MYs 2012-2016 CAFE and
GHG standards in May 2010, NHTSA and EPA began work on the next joint
rulemaking to develop CAFE and GHG standards for MY 2017 to 2025 and
beyond. The preamble to the 2012-2016 final rule stated that NHTSA,
working closely with EPA and the Department of Energy (DOE), would
perform a new statistical analysis of the relationships between
fatality rates, mass and footprint, updating the crash and exposure
databases to the latest available model years, refining the methodology
in response to peer reviews of the 2010 report and taking into account
changes in vehicle technologies. The previous databases of MY 1991-1999
vehicles in CY 1995-2000 crashes has become outdated as new safety
technologies, vehicle designs and materials were introduced. The new
databases comprising MY 2000-2007 vehicles in CY 2002-2008 crashes with
the most up-to-date possible, given the processing lead time for crash
data and the need for enough crash cases to permit statistically
meaningful analyses. NHTSA has made the new databases available to the
public,\192\ enabling other researchers to analyze the same data and
hopefully minimizing discrepancies in the results due to
inconsistencies across the data used.\193\
---------------------------------------------------------------------------
\192\ http://www.nhtsa.gov/fuel-economy.
\193\ 75 FR 25324 (May 7, 2010); the discussion of planned
statistical analyses is on pp. 25395-25396.
---------------------------------------------------------------------------
One way to estimate these effects is via statistical analyses of
societal fatality
[[Page 74951]]
rates per vehicle miles traveled (VMT), by vehicles' mass and
footprint, for the current on-road vehicle fleet. The basic analytical
method used for the 2011 NHTSA report is the same as in NHTSA's 2010
report: Cross-sectional analyses of the effect of mass and footprint
reductions on the societal fatality rate per billion vehicle miles of
travel (VMT), while controlling for driver age and gender, vehicle
type, vehicle safety features, crash times and locations, and other
factors. Separate logistic regression models are run for three types of
vehicles and nine types of crashes. Societal fatality rates include
occupants of all vehicles in the crash, as well as non-occupants, such
as pedestrians and cyclists. NHTSA's 2011 Report \194\ analyzes MY
2000-2007 cars and LTVs in CY 2002-2008 crashes. Fatality rates were
derived from FARS data, 13 State crash files, and registration and
mileage data from R.L. Polk.
---------------------------------------------------------------------------
\194\ Kahane, C. J. (2011). ``Relationships Between Fatality
Risk, Mass, and Footprint in Model Year 2000-2007 Passenger Cars and
LTVs,'' July 2011. The report is available in the NHTSA docket,
NHTSA-2010-0152. You can access the docket at http://www.regulations.gov/#!home by typing `NHTSA-2010-0152' where it says
``enter keyword or ID'' and then clicking on ``Search.''
---------------------------------------------------------------------------
The most noticeable change in MY 2000-2007 vehicles from MY 1991-
1999 has been the increase in crossover utility vehicles (CUV), which
are SUVs of unibody construction, often but not always built upon a
platform shared with passenger cars. CUVs have blurred the distinction
between cars and trucks. The new analysis treats CUVs and minivans as a
separate vehicle class, because they differ in some respects from
pickup-truck-based LTVs and in other respects from passenger cars. In
the 2010 report, the many different types of LTVs were combined into a
single analysis and NHTSA believes that this may have made the analyses
too complex and might have contributed to some of the uncertainty in
the results.
The new database has accurate VMT estimates, derived from a file of
odometer readings by make, model, and model year recently developed by
R.L. Polk and purchased by NHTSA.\195\ For the 2011 report, the
relative distribution of crash types has been changed to reflect the
projected distribution of crashes during the period from 2017 to 2025,
based on the estimated effectiveness of electronic stability control
(ESC) in reduction the number of fatalities in rollover crashes and
crashes with a stationary object. The annual target population of
fatalities or the annual fatality distribution baseline \196\ was not
decreased in the period between 2017 and 2025 for the safety statistics
analysis, but is taken into account later in the Volpe model analysis,
since all vehicles in the future will be equipped with ESC.\197\
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\195\ In the 1991-1999 data base, VMT was estimated only by
vehicle class, based on NASS CDS data.
\196\ MY 2004-2007 vehicles with fatal crashes occurred in CY
2004-2008 are selected as the annual fatality distribution baseline
in the Kahane analysis.
\197\ In the Volpe model, NHTSA assumed that the safety trend
would result in 12.6 percent reduction between 2007 and 2020 due to
the combination of ESC, new safety standard, and behavior changes
anticipated.
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For the 2011 report, vehicles are now grouped into five classes
rather than four: passenger cars (including both 2-door and 4-door
cars) are split in half by median weight; CUVs and minivans; and truck-
based LTVs, which are also split in half by median weight of the model
year 2000-2007 vehicles. Table II-12 presents the estimated percent
increase in U.S. societal fatality risk per ten billion VMT for each
100-pound reduction in vehicle mass, while holding footprint constant,
for each of the five classes of vehicles.
[GRAPHIC] [TIFF OMITTED] TP01DE11.042
Only the 1.44 percent risk increase in the lighter cars is
statistically significant. There are non-significant increases in the
heavier cars and the lighter truck-based LTVs, and non-significant
societal benefits for mass
[[Page 74952]]
reduction in CUVs, minivans, and the heavier truck-based LTVs. Based on
these results, potential combinations of mass reductions that maintain
footprint and are proportionately somewhat higher for the heavier
vehicles may be safety-neutral or better as point estimates and, in any
case, unlikely to significantly increase fatalities. The primarily non-
significant results are not due to a paucity of data, but because the
societal effect of mass reduction while maintaining footprint, if any,
is small.
MY 2000-2007 vehicles of all types are heavier and larger than
their MY 1991-1999 counterparts. The average mass of passenger cars
increased by 5 percent from 2000 to 2007 and the average mass of pickup
trucks increased by 19 percent. Other types of vehicles became heavier,
on the average, by intermediate amounts. There are several reasons for
these increases: during this time frame, some of the lighter make-
models were discontinued; many models were redesigned to be heavier and
larger; and consumers more often selected stretched versions such as
crew cabs in their new-vehicle purchases.
It is interesting to compare the new results to NHTSA's 2010
analysis of MY 1991-1999 vehicles in CY 1995-2000, especially the new
point estimate to the ``actual regression result scenario'' in the 2010
report:
[GRAPHIC] [TIFF OMITTED] TP01DE11.043
The new results are directionally the same as in 2010: fatality
increase in the lighter cars, safety benefit in the heavier LTVs, but
the effects may have become weaker at both ends. (The agencies do not
consider this conclusion to be
[[Page 74953]]
definitive because of the relatively wide confidence bounds of the
estimates.) The fatality increase in the lighter cars tapered off from
2.21 percent to 1.44 percent while the societal benefit of mass
reduction in the heaviest LTVs diminished from 1.90 percent to 0.39
percent and is no longer statistically significant.
The agencies believe that the changes may be due to a combination
of both changes in the characteristics of newer vehicles and revisions
to the analysis. NHTSA believes, above all, that several light, small
car models with poor safety performance were discontinued by 2000 or
during 2000-2007. Also, the tendency of light, small vehicles to be
driven poorly is not as strong as it used to be--perhaps in part
because safety improvements in lighter and smaller vehicles have made
some good drivers more willing to buy them. Both agencies believe that
at the other end of the weight/size spectrum, blocker beams and other
voluntary compatibility improvements in LTVs, as well as compatibility-
related self-protection improvements to cars, have made the heavier
LTVs less aggressive in collisions with lighter vehicles (although the
effect of mass disparity remains). This report's analysis of CUVs and
minivans as a separate class of vehicles may have relieved some
inaccuracies in the 2010 regression results for LTVs. Interestingly,
the new actual-regression results are quite close to the previous
report's ``lower-estimate scenario,'' which was an attempt to adjust
for supposed inaccuracies in some regressions and for a seemingly
excessive trend toward higher crash rates in smaller and lighter cars.
The principal difference between the heavier vehicles, especially
truck-based LTVs, and the lighter vehicles, especially passenger cars,
is that mass reduction has a different effect in collisions with
another car or LTV. When two vehicles of unequal mass collide, the
delta V is higher in the lighter vehicle, in the same proportion as the
mass ratio. As a result, the fatality risk is also higher. Removing
some mass from the heavy vehicle reduces delta V in the lighter
vehicle, where fatality risk is high, resulting in a large benefit,
offset by a small penalty because delta V increases in the heavy
vehicle, where fatality risk is low--adding up to a net societal
benefit. Removing some mass from the lighter vehicle results in a large
penalty offset by a small benefit--adding up to net harm. These
considerations drive the overall result: fatality increase in the
lighter cars, reduction in the heavier LTVs, and little effect in the
intermediate groups. However, in some types of crashes, especially
first event rollovers and impacts with fixed objects, mass reduction is
usually not harmful and often beneficial, because the lighter vehicles
respond more quickly to braking and steering and are often more stable
because their center of gravity is lower. Offsetting that benefit is
the continuing historical tendency of lighter and smaller vehicles to
be driven less well--although it continues to be unknown why that is
so, and to what extent, if any, the lightness or smallness of the
vehicle contributes to people driving it less safely.
The estimates of the model are formulated for each 100-pound
reduction in mass; in other words, if risk increases by 1 percent for
100 pounds reduction in mass, it would increase by 2 percent for a 200-
pound reduction, and 3 percent for a 300-pound reduction (more exactly,
2.01 percent and 3.03 percent, because the effects work like compound
interest). Confidence bounds around the point estimates will grow wider
by the same proportions.
The regression results are best suited to predict the effect of a
small change in mass, leaving all other factors, including footprint,
the same. With each additional change from the current environment, the
model may become somewhat less accurate and it is difficult to assess
the sensitivity to additional mass reduction greater than 100 pounds.
The agencies recognize that the light-duty vehicle fleet in the 2017-
2025 timeframe will be different than the 2000-2007 fleet analyzed for
this study. Nevertheless, one consideration provides some basis for
confidence. This is NHTSA's fourth evaluation of the effects of mass
reduction and/or downsizing, comprising databases ranging from MY 1985
to 2007. The results of the four studies are not identical, but they
have been consistent up to a point. During this time period, many makes
and models have increased substantially in mass, sometimes as much as
30-40 percent.\198\ If the statistical analysis has, over the past
years, been able to accommodate mass increases of this magnitude,
perhaps it will also succeed in modeling the effects of mass reductions
on the order of 10-20 percent, if they occur in the future.
---------------------------------------------------------------------------
\198\ For example, one of the most popular models of small 4-
door sedans increased in curb weight from 1,939 pounds in MY 1985 to
2,766 pounds in MY 2007, a 43 percent increase. A high-sales mid-
size sedan grew from 2,385 to 3,354 pounds (41%); a best-selling
pickup truck from 3,390 to 4,742 pounds (40%) in the basic model
with 2-door cab and rear-wheel drive; and a popular minivan from
2,940 to 3,862 pounds (31%).
---------------------------------------------------------------------------
e. Report by Tom Wenzel, LBNL, ``An Assessment of NHTSA's Report
`Relationships Between Fatality Risk, Mass, and Footprint in Model Year
2000-2007 Passenger Cars and LTVs'' ', 2011
DOE contracted with Tom Wenzel of Lawrence Berkeley National
Laboratory to conduct an assessment of NHTSA's updated 2011 study of
the effect of mass and footprint reductions on U.S. fatality risk per
vehicle miles traveled, and to provide an analysis of the effect of
mass and footprint reduction on casualty risk per police-reported
crash, using independent data from thirteen states. The assessment has
been completed and reviewed by NHTSA and EPA staff, and a draft final
version is included in the docket of today's rulemaking; the separate
analysis of crash data from thirteen states will be completed and
included in the docket shortly. Both reports will be peer reviewed by
outside experts.
The LBNL report replicates Kahane's analysis for NHTSA, using the
same data and methods, and in many cases using the same SAS programs.
The Wenzel report finds that although mass reduction in lighter (less
than 3,106 lbs) cars leads to a statistically significant 1.44%
increase in fatality risk per vehicle miles travelled (VMT), the
increase is small. He tests this result for sensitivity to changes in
specifications of the regression models and what data are used. In
addition Wenzel shows that there is a wide range in fatality rates by
vehicle model for models that have the same mass, even after accounting
for differences in drivers' age and gender, safety features installed,
and crash times and locations. This section summarizes the results of
the Wenzel assessment of the most recent NHTSA analysis.
The LBNL report highlights the effect of the other driver, vehicle,
and crash control variables, in addition to the effect of mass and
footprint reduction, on risk. Some of the other variables NHTSA
included in its regression models have much larger effects on fatality
risk than mass or footprint reduction. For example, the models indicate
that a 100-lb increase in the mass of a lighter car results in a 1.44%
reduction in fatality risk; this is the largest estimated effect of
changes in vehicle mass, and the only one that is statistically
significant. For comparison this reduction in fatality risk could also
be achieved by a 13% increase in 4-door sedans equipped with ESC.
The 1.44% increase in risk from reducing mass in the lighter cars
was
[[Page 74954]]
tested for sensitivity changes in the specification of, or the data
used in, the regression models. For example, using the current
distribution of crashes, rather than adjusting the distribution to that
expected after full adoption of ESC, reduces the effect to 1.18%;
excluding the calendar year variables from the model, which may be
weakening the modeled benefits of vehicle safety technologies, reduces
the effect to 1.39%; and including vehicle make in the model increases
the effect to 1.81%. The results also are sensitive to the selection of
data to include in the analysis: Excluding bad drivers increases the
effect to 2.03%, while excluding crashes involving alcohol or drugs
increases the effect to 1.66%, and including sports, police, and all-
wheel drive cars increases the effect to 1.64%. Finally, changing the
definition of risk also affects the result for lighter cars: Using the
number of fatalities per induced exposure crash reduces the effect to -
0.24% (that is, a 0.24% reduction in risk), while using the number of
fatal crashes (rather than total fatalities) per VMT increases the
effect to 1.84%. These sensitivity tests, except one, changed the
estimated coefficient by less than 1 percentage point, which is within
its statistical confidence bounds of 0.29 to 2.59 percent and may be
considered compatible with the baseline result. Using two or more
variables that are strongly correlated in the same regression model
(referred to as multicollinearity) can lead to inaccurate results.
However, the correlation between vehicle mass and footprint may not be
strong enough to cause serious concern. Experts suggest that a
correlation of greater than 0.60 (or a variance inflation factor of
2.5) raises concern about multicollinearity.\199\ The correlation
between vehicle mass and footprint ranges from over 0.80 for four-door
sedans, pickups, and SUVs, to about 0.65 for two-door cars and CUVs, to
0.26 for minivans; when pickups and SUVs are considered together, the
correlation between mass and footprint is 0.65. Wenzel notes that the
2011 NHTSA report recognizes that the ``near'' multicollinearity
between mass and footprint may not be strong enough to invalidate the
results from a regression model that includes both variables. In
addition, NHTSA included several analyses to address possible effects
of the near-multicollinearity between mass and footprint.
---------------------------------------------------------------------------
\199\ Light-Duty Vehicle Greenhouse Gas Emission Standards and
Corporate Average Fuel Economy Standards; Final Rule, April 1, 2010,
Section II.G.3., page 139.
---------------------------------------------------------------------------
First, NHTSA ran a sensitivity model specification, where footprint
is not held constant, but rather allowed to vary as mass varies (i.e.
NHTSA ran a regression model which includes mass but not footprint). If
the multicollinearity was so great that including both variables in the
same model gave misleading results, removing footprint from the model
could give mass coefficients five or more percentage points different
than keeping it in the model. NHTSA's sensitivity test indicates that
when footprint is allowed to vary with mass, the effect of mass
reduction on risk increases from 1.44% to 2.64% for lighter cars, and
from a non-significant 0.47% to a statistically-significant 1.94% for
heavier cars (changes of less than two percentage points); however, the
effect of mass reduction on light trucks is unchanged, and is still not
statistically significant for CUVs/minivans.
Second, NHTSA conducted a stratification analysis of the effect of
mass reduction on risk by dividing vehicles into deciles based on their
footprint, and running a separate regression model for each vehicle and
crash type, for each footprint decile (3 vehicle types times 9 crash
types times 10 deciles equals 270 regressions). This analysis estimates
the effect of mass reduction on risk separately for vehicles with
similar footprint. The analysis indicates that mass reduction does not
consistently increase risk across all footprint deciles for any
combination of vehicle type and crash type. Mass reduction increases
risk in a majority of footprint deciles for 13 of the 27 crash and
vehicle combinations, but few of these increases are statistically
significant. On the other hand, mass reduction decreases risk in a
majority of footprint deciles for 9 of the 27 crash and vehicle
combinations; in some cases these risk reductions are large and
statistically significant.\200\ If reducing vehicle mass while
maintaining footprint inherently leads to an increase in risk, the
coefficients on mass reduction should be more consistently positive,
and with a larger R2, across the 27 vehicle/crash
combinations, than shown in the analysis. These findings are consistent
with the conclusion of the basic regression analyses, namely, that the
effect of mass reduction while holding footprint constant, if any, is
small.
---------------------------------------------------------------------------
\200\ And in 5 of the 27 crash and vehicle combinations, mass
reduction increased risk in 5 deciles and decreased risk in 5
deciles.
---------------------------------------------------------------------------
One limitation of using logistic regression to estimate the effect
of mass reduction on risk is that a standard statistic to measure the
extent to which the variables in the model explain the range in risk,
equivalent to the R2> statistic in a linear regression
model, does not exist. (SAS does generate a pseudo-R2 value
for logistic regression models; in almost all of the NHTSA regression
models this value is less than 0.10). For this reason LBNL conducted an
analysis of risk versus mass by vehicle model. LBNL used the results of
the NHTSA logistic regression model to predict the number of fatalities
expected after accounting for all vehicle, driver, and crash variables
included in the NHTSA regression model except for vehicle weight and
footprint. LBNL then plotted expected fatality risk per VMT by vehicle
model against the mass of each model, and analyzed the change in risk
as mass increases, as well as how much of the change in risk was
explained by all of the variables included in the model.
The analysis indicates that, after accounting for all the
variables, risk does decrease as mass increases; however, risk and mass
are not strongly correlated, with the R2 ranging from 0.33
for CUVs to less than 0.15 for all other vehicle types (as shown in
Figure x). This means that, on average, risk decreases as mass
increases, but the variation in risk among individual vehicle models is
stronger than the trend in risk from light to heavy vehicles. For
fullsize (i.e. 3/4- and 1-ton) pickups, risk increases as mass
increases, with an R2 of 0.43, consistent with NHTSA's basic
regression results for the heavier LTVs (societal risk increases as
mass increases). LBNL also examined the relationship between residual
risk, that is the remaining unexplained risk after accounting for all
vehicle, driver and crash variables, and mass, and found similarly poor
correlations. This implies that the remaining factors not included in
the regression model that account for the observed range in risk by
vehicle model also are not correlated with mass. (LBNL found similar
results when the analysis compared risk to vehicle footprint.)
Figure II-2 indicates that some vehicles on the road today have the
same, or lower, fatality rates than models that weigh substantially
more, and are substantially larger in terms of footprint. After
accounting for differences in driver age and gender, safety features
installed, and crash times and locations, there are numerous examples
of different models with similar weight and footprint yet widely
varying fatality rates. The variation of fatality rates among
individual models may reflect differences in vehicle
[[Page 74955]]
design, differences in the drivers who choose such vehicles (beyond
what can be explained by demographic variables such as age and gender),
and statistical variation of fatality rates based on limited data for
individual models. Differences in vehicle design can, and already do,
mitigate some safety penalties from reduced mass; this is consistent
with NHTSA's opinion that some of the changes in its regression results
between the 2003 study and the 2011 study are due to the redesign or
removal of certain smaller and lighter models of poor design.
[GRAPHIC] [TIFF OMITTED] TP01DE11.044
f. Based on this information, what do the agencies consider to be the
current state of statistical research on vehicle mass and safety?
The agencies believe that statistical analysis of historical crash
data continues to be an informative and important tool in assessing the
potential safety impacts of the proposed standards. The effect of mass
reduction while maintaining footprint is a complicated topic and there
are open questions whether future designs will reduce the historical
correlation between weight and size. It is important to note that while
the updated database represents more current vehicles with technologies
more representative of vehicles on the road today, they still do not
fully represent what vehicles will be on the road in the 2017-2025
timeframe. The vehicles manufactured in the 2000-2007 timeframe were
not subject to footprint-based fuel economy standards. The agencies
expect that the attribute-based standards will likely facilitate the
design of vehicles such that manufacturers may reduce mass while
maintaining footprint. Therefore, it is possible that the analysis for
2000-2007 vehicles may not be fully representative of the vehicles that
will be on the road in 2017 and beyond.
While we recognize that statistical analysis of historical crash
data may not be the only way to think about the future relationship
between vehicle mass and safety, we also recognize that other
assessment methods are also subject to uncertainties, which makes
statistical analysis of historical data an important starting point if
employed mindfully and recognized for how it can be useful and what its
limitations may be.
NHTSA undertook the independent review of statistical studies and
held the mass-safety workshop in February 2011 in order to help the
agencies sort through the ongoing debates over what statistical
analysis of historical data is actually telling us. Previously, the
agencies have assumed that differences in results were due in part to
inconsistent databases; by creating the updated common database and
making it publicly available, we are hopeful that that aspect of the
problem has been resolved, and moreover, the UMTRI review suggested
that differences in data were probably less significant than the
agencies may have thought. Statistical analyses of historical crash
data should be examined for potential multicollinearity issues. The
agencies will continue to monitor issues with multicollinearity in our
analyses, and hope that outside researchers will do the same. And
finally, based on the findings of the independent review, the agencies
continue to be confident that Kahane's analysis is one of the best for
the purpose of analyzing potential safety effects of future CAFE and
GHG standards. UMTRI concluded that Kahane's approach is valid, and
Kahane has continued and refined that approach for the current
analysis. The NHTSA 2011 statistical fatality report finds
directionally similar but less statistically significant relationships
between vehicle mass, size, and footprint, as discussed above. Based on
these findings, the agencies believe that
[[Page 74956]]
in the future, fatalities due to mass reduction will be best reduced if
mass reduction is concentrated in the heaviest vehicles. NHTSA
considers part of the reason that more recent historical data shows a
dampened effect in the relationship between mass reduction and safety
is that all vehicles, including traditionally lighter ones, grew
heavier during that timeframe (2000s). As lighter vehicles might become
more prevalent in the fleet again over the next decade, it is possible
that the trend could strengthen again. On the other hand, extensive use
of new lightweight materials and optimized vehicle design may weaken
the relationship. Future updated analyses will be necessary to
determine how the effect of mass reduction on risk changes over time.
Both agencies agree that there are several identifiable safety
trends already in place or expected to occur in the foreseeable future
that are not accounted for in the study, since they were not in effect
at the time that the vehicles in question were manufactured. For
example, there are two important new safety standards that have already
been issued and will be phasing in after MY 2008. FMVSS No. 126 (49 CFR
Sec. 571.126) requires electronic stability control in all new
vehicles by MY 2012, and the upgrade to FMVSS No. 214 (Side Impact
Protection, 49 CFR Sec. 571.214) will likely result in all new
vehicles being equipped with head-curtain air bags by MY 2014.
Additionally, we anticipate continued improvements in driver (and
passenger) behavior, such as higher safety belt use rates. All of these
may tend to reduce the absolute number of fatalities. On the other
hand, as crash avoidance technology improves, future statistical
analysis of historical data may be complicated by a lower number of
crashes. In summary, the agencies have relied on the coefficients in
the Kahane 2011 study for estimating the potential safety effects of
the proposed CAFE and GHG standards for MYs 2017-2025, based on our
assumptions regarding the amount of mass reduction that could be used
to meet the standards in a cost-effective way without adversely
affecting safety. Section E below discusses the methodology used by the
agencies in more detail; while the results of the safety effects
analysis are less significant than the results in the MY 2012-2016
final rule, the agencies still believe that any statistically
significant results warrant careful consideration of the assumptions
about appropriate levels of mass reduction on which to base future CAFE
and GHG standards, and have acted accordingly in developing the
proposed standards.
4. How do the agencies think technological solutions might affect the
safety estimates indicated by the statistical analysis?
As mass reduction becomes a more important technology option for
manufacturers in meeting future CAFE and GHG standards, manufacturers
will invest more and more resources in developing increasingly
lightweight vehicle designs that meet their needs for manufacturability
and the public's need for vehicles that are also safe, useful,
affordable, and enjoyable to drive. There are many different ways to
reduce mass, as discussed in Chapter 3 of this TSD and in Sections II,
III, and IV of the preamble, and a considerable amount of information
is available today on lightweight vehicle designs currently in
production and that may be able to be put into production in the
rulemaking timeframe. Discussion of lightweight material designs from
NHTSA's workshop is presented below.
Besides ``lightweighting'' technologies themselves, though, there
are a number of considerations when attempting to evaluate how future
technological developments might affect the safety estimates indicated
by the statistical analysis. As discussed in the first part of this
chapter, for example, careful changes in design and/or materials used
might mitigate some of the potential decrease in safety from mass
reduction--through improved distribution of crash pulse energy, etc.--
but these techniques can sometimes cause other problems, such as
increased crash forces on vehicle occupants that have to be mitigated,
or greater aggressivity against other vehicles in crashes.
Manufacturers may develop new and better restraints--air bags, seat
belts, etc.--to protect occupants in lighter vehicles in crashes, but
NHTSA's current safety standards for restraint systems are designed
based on the current fleet, not the yet-unknown future fleet. The
agency will need to monitor trends in the crash data to see whether
changes to the safety standards (or new safety standards) become
necessary. Manufacturers are also increasingly investigating a variety
of crash avoidance technologies--ABS, electronic stability control
(ESC), lane departure warnings, vehicle-to-vehicle (V2V)
communications--that, as they become more prevalent in the fleet, are
expected to reduce the number of overall crashes, and fatal, crashes.
Until these technologies are present in the fleet in greater numbers,
however, it will be difficult to assess whether they can mitigate the
observed relationship between vehicle mass and safety in the historical
data.
Along with the California Air Resources Board (CARB), the agencies
have initiated several projects to estimate the maximum potential for
advanced materials and improved designs to reduce mass in the MY 2017-
2021 timeframe, while continuing to meeting safety regulations and
maintaining functionality of vehicles. Another NHTSA-sponsored study
will estimate the effects of these design changes on overall fleet
safety.
A. NHTSA has awarded a contract to Electricore, with EDAG and
George Washington University (GWU) as subcontractors, to study the
maximum feasible amount of mass reduction for a mid-size car--
specifically, a Honda Accord. The study tore down a MY 2011 Honda
Accord, studied each component and sub-system, and then redesigned each
component and sub-system trying to maximize the amount of mass
reduction with technologies that are considered feasible for 200,000
units per year production volume during the time frame of this
rulemaking. Electricore and its sub-contractors are consulting industry
leaders and experts for each component and sub-system when deciding
which technologies are feasible. Electricore and its sub-contractors
are also building detailed CAD/CAE/powertrain models to validate
vehicle safety, stiffness, NVH, durability, drivability and powertrain
performance. For OEM-supplied parts, a detailed cost model is being
built based on a Technical Cost Modeling (TCM) approach developed by
the Massachusetts Institute of Technology (MIT) Materials Systems
Laboratory's research\201\ to estimate the costs to OEMs for
manufacturing parts. The cost will be broken down into each of the
operations involved in the manufacturing; for example, for a sheet
metal part, production costs will be estimated from the blanking of the
steel coil to the final operation to fabricate the component. Total
costs are then categorized into fixed cost, such as tooling, equipment,
and facilities; and variable costs such as labor, material, energy, and
maintenance. These costs will be assessed through an interactive
process between the product designer, manufacturing engineers, and cost
[[Page 74957]]
analysts. For OEM-purchased parts, the cost will be estimated by
consultation with experienced cost analysts and Tier 1 system
suppliers. This study will help to inform the agencies about the
feasible amount of mass reduction and the cost associated with it.
NHTSA intends to have this study completed and peer reviewed before
July 2012, in time for it to play an integral role in informing the
final rule.
---------------------------------------------------------------------------
\201\ Frank Field, Randolph Kirchain and Richard Roth, Process
cost modeling: Strategic engineering and economic evaluation of
materials technologies, JOM Journal of the Minerals, Metals and
Materials Society, Volume 59, Number 10, 21-32. Available at http://msl.mit.edu/pubs/docs/Field_KirchainCM_StratEvalMatls.pdf (last
accessed Aug. 22, 2011).
---------------------------------------------------------------------------
B. EPA has awarded a similar contract to FEV, with EDAG and Monroe
& Associates, Inc. as subcontractors, to study the maximum feasible
amount of mass reduction for a mid-size CUV (cross over vehicle)
specifically, a Toyota Venza. The study tears down a MY 2010 vehicle,
studies each component and sub-system, and then redesigns each
component and sub-system trying to maximize the amount of mass
reduction with technologies that are considered feasible for high
volume production for a 2017 MY vehicle. FEV in coordination with EDAG
is building detailed CAD/CAE/powertrain models to validate vehicle
safety, stiffness, NVH, durability, drivability and powertrain
performance to assess the safety of this new design. This study builds
upon the low development (20% mass reduction) design in the 2010 Lotus
Engineering study ``An Assessment of Mass Reduction Opportunities for a
2017-2020 Model Year Vehicle Program''. This study builds upon the low
development (20% mass reduction) design in the 2010 Lotus Engineering
study ``An Assessment of Mass Reduction Opportunities for a 2017-2020
Model Year Vehicle Program''. This study will undergo a peer review.
EPA intends to have this study completed and peer reviewed before July
2012, in time for it to play an integral role in informing the final
rule.
C. California Air Resources Board (CARB) has awarded a contract to
Lotus Engineering, to study the maximum feasible amount of mass
reduction for a mid-size CUV (cross over vehicle) specifically, a
Toyota Venza. The study will concentrate on the Body-in-White and
closures in the high development design (40% mass reduction) in the
Lotus Engineering study cited above. The study will provide an updated
design with crash simulation, detailed costing and manufacturing
feasibility of these two systems for a MY2020 high volume production
vehicle. This study will undergo a peer review. EPA intends to have
this study completed and peer reviewed before July 2012, in time for it
to play an integral role in informing the final rule.
D. NHTSA has contracted with George Washington University (GWU) to
build a fleet simulation model to study the impact and relationship of
light-weight vehicle design and injuries and fatalities. This study
will also include an evaluation of potential countermeasures to reduce
any safety concerns associated with lightweight vehicles. NHTSA will
include three light-weighted vehicle designs in this study: the one
from Electricore/EDAG/GWU mentioned above, one from Lotus Engineering
funded by California Air Resource Board for the second phase of the
study, evaluating mass reduction levels around 35 percent of total
vehicle mass, and two funded by EPA and the International Council on
Clean Transportation (ICCT). This study will help to inform the
agencies about the possible safety implications for light-weight
vehicle designs and the appropriate counter-measures,\202\ if
applicable, for these designs, as well as the feasible amounts of mass
reduction. All of these analyses are expected to be finished and peer-
reviewed before July 2012, in time to inform the final rule.
---------------------------------------------------------------------------
\202\ Countermeasures could potentially involve improved front
end structure, knee bags, seat ramps, buckle pretensioners, and
others.
---------------------------------------------------------------------------
a. NHTSA workshop on vehicle mass, size and safety
As stated above, in section C.2, on February 25, 2011, NHTSA hosted
a workshop on mass reduction, vehicle size, and fleet safety at the
Headquarters of the US Department of Transportation in Washington, DC.
The purpose of the workshop was to provide the agencies with a broad
understanding of current research in the field and provide stakeholders
and the public with an opportunity to weigh in on this issue. The
agencies also created a public docket to receive comments from
interested parties that were unable to attend. The presentations were
divided into two sessions that addressed the two expansive sets of
issues. The first session explored statistical evidence of the roles of
mass and size on safety, and is summarized in section C.2. The second
session explored the engineering realities of structural
crashworthiness, occupant injury and advanced vehicle design, and is
summarized here. The speakers in the second session included Stephen
Summers of NHTSA, Gregg Peterson of Lotus Engineering, Koichi Kamiji of
Honda, John German of the International Council on Clean Transportation
(ICCT), Scott Schmidt of the Alliance of Automobile Manufacturers, Guy
Nusholtz of Chrysler, and Frank Field of the Massachusetts Institute of
Technology.
The second session explored what degree of weight reduction and
occupant protection are feasible from technical, economic, and
manufacturing perspectives. Field emphasized that technical feasibility
alone does not constitute feasibility in the context of vehicle mass
reduction. Sufficient material production capacity and viable
manufacturing processes are essential to economic feasibility. Both
Kamiji and German noted that both good materials and good designs will
be necessary to reduce fatalities. For example, German cited the
examples of hexagonally structured aluminum columns, such as used in
the Honda Insight, that can improve crash absorption at lower mass, and
of high-strength steel components that can both reduce weight and
improve safety. Kamiji made the point that widespread mass reduction
will reduce the kinetic energy of all crashes which should produce some
beneficial effect.
Summers described NHTSA's plans for a model to estimate fleetwide
safety effects based on an array of vehicle-to-vehicle computational
crash simulations of current and anticipated vehicle designs. In
particular, three computational models of lightweight vehicles are
under development. They are based on current vehicles that have been
modified to substantially reduce mass. The most ambitious was the
``high development'' derivative of a Toyota Venza developed by Lotus
Engineering and discussed by Mr. Peterson. Its structure currently
contains about 75% aluminum, 12% magnesium, 8% steel, and 5% advanced
composites. Peterson expressed confidence that the design had the
potential to meet federal safety standards. Nusholtz emphasized that
computational crash simulations involving more advanced materials were
less reliable than those involving traditional metals such as aluminum
and steel.
Nusholtz presented a revised data-based fleet safety model in which
important vehicle parameters were modeled based on trends from current
NCAP crash tests. For example, crash pulses and potential intrusion for
a particular size vehicle were based on existing distributions. Average
occupant deceleration was used to estimate injury risk. Through a range
of simulations of modified vehicle fleets, he was able to estimate the
net effects of various design strategies for lighter weight vehicles,
such as various scaling approaches for vehicle stiffness or intrusion.
The approaches were selected based on engineering requirements for
modified
[[Page 74958]]
vehicles. Transition from the current fleet was considered. He
concluded that protocols resulting in safer transitions (e.g., removing
more mass from heavier vehicles with appropriate stiffness scaling
according to a \3/2\ power law) were not generally consistent with
those that provide the greatest reduction in GHG production.
German discussed several important points on the future of mass
reduction. Similar to Kahane's discussion of the difficulties of
isolating the impact of weight reduction, German stated that other
important variables, such as vehicle design and compatibility factors,
must be held constant in order for size or weight impacts to be
quantified in statistical analyses. He presented results that, compared
to driver, driving influences, and vehicle design influences, the
safety impacts of size and weight are small and difficult to quantify.
He noted that several scenarios, such as rollovers, greatly favored the
occupants of smaller and lighter cars once a crash occurred. He pointed
out that if size and design are maintained, lower weight should
translate into a lower total crash force. He thought that advanced
material designs have the potential to ``decouple'' the historical
correlation between vehicle size and weight, and felt that effective
design and driver attributes may start to dominate size and weight
issues in future vehicle models.
Other presenters noted industry's perspective of the effect of
incentivizing weight reduction. Field highlighted the complexity of
institutional changes that may be necessitated by weight reduction,
including redesign of material and component supply chains and
manufacturing infrastructure. Schmidt described an industry perspective
on the complicated decisions that must be made in the face of
regulatory change, such as evaluating goals, gains, and timing.
Field and Schmidt noted that the introduction of technical
innovations is generally an innate development process involving both
tactical and strategic considerations that balance desired vehicle
attributes with economic and technical risk. In the absence of
challenging regulatory requirements, a substantial technology change is
often implemented in stages, starting with lower volume pilot
production before a commitment is made to the infrastructure and supply
chain modifications necessary for inclusion on a high-volume production
model. Joining, damage characterization, durability, repair, and
significant uncertainty in final component costs are also concerns.
Thus, for example, the widespread implementation of high-volume
composite or magnesium structures might be problematic in the short or
medium term when compared to relatively transparent aluminum or high
strength steel implementations. Regulatory changes will affect how
these tradeoffs are made and these risks are managed.
Koichi Kamiji presented data showing in increased use of high
strength steel in their Honda product line to reduced vehicle mass and
increase vehicle safety. He stated that mass reduction is clearly a
benefit in 42% of all fatal crashes because absolute energy is reduced.
He followed up with slides showing the application of certain optimized
it designs can improve safety even when controlling for weight and
size.
A philosophical theme developed that explored the ethics of
consciously allowing the total societal harm associated with mass
reduction to approach the anticipated benefits of enhanced safety
technologies. Although some participants agreed that there may
eventually be specific fatalities that would not have occurred without
downsizing, many also agreed that safety strategies will have to be
adapted to the reality created by consumer choices, and that ``We will
be ok if we let data on what works--not wishful thinking--guide our
strategies.''
5. How have the agencies estimated safety effects for the proposed
standards?
a. What was the agencies' methodology for estimating safety effects for
the proposed standards?
As explained above, the agencies consider the 2011 statistical
analysis of historical crash data by NHTSA to represent the best
estimates of the potential relationship between mass reduction and
fatality increases in the future fleet. This section discusses how the
agencies used NHTSA's 2011 analysis to calculate specific estimates of
safety effects of the proposed standards, based on the analysis of how
much mass reduction manufacturers might use to meet the proposed
standards.
Neither the proposed CAFE/GHG standards nor the agencies' analysis
mandates mass reduction, or mandates that mass reduction occur in any
specific manner. However, mass reduction is one of the technology
applications available to the manufacturers and a degree of mass
reduction is used by both agencies' models to determine the
capabilities of manufacturers and to predict both cost and fuel
consumption/emissions impacts of improved CAFE/GHG standards. We note
that the amount of mass reduction selected for this rulemaking is based
on our assumptions about how much is technologically feasible without
compromising safety. While we are confident that manufacturers will
build safe vehicles, we cannot predict with certainty that they will
choose to reduce mass in exactly the ways that the agencies have
analyzed in response to the standards. In the event that manufacturers
ultimately choose to reduce mass and/or footprint in ways not analyzed
or anticipated by the agencies, the safety effects of the rulemaking
may likely differ from the agencies' estimates.
NHTSA utilized the 2011 Kahane study relationships between weight
and safety, expressed as percent changes in fatalities per 100-pound
weight reduction while holding footprint constant. However, as
mentioned previously, there are several identifiable safety trends
already occurring, or expected to occur in the foreseeable future, that
are not accounted for in the study. For example, the two important new
safety standards that were discussed above for electronic stability
control and head curtain airbags, have already been issued and began
phasing in after MY 2008. The recent shifts in market shares from
pickups and SUVs to cars and CUVs may continue, or accelerate, if
gasoline prices remain high, or rise further. The growth in vehicle
miles travelled may continue to stagnate if the economy does not
improve, or gasoline prices remain high. And improvements in driver
(and passenger) behavior, such as higher safety belt use rates, may
continue. All of these will tend to reduce the absolute number of
fatalities in the future. The agency estimated the overall change in
fatalities by calendar year after adjusting for ESC, Side Impact
Protection, and other Federal safety standards and behavioral changes
projected through this time period. The smaller percent changes in risk
from mass reduction (from the 2011 NHTSA analysis), coupled with the
reduced number of baseline fatalities, results in smaller absolute
increases in fatalities than those predicted in the 2010 rulemaking.
NHTSA examined the impacts of identifiable safety trends over the
lifetime of the vehicles produced in each model year. An estimate of
these impacts was contained in a previous
[[Page 74959]]
agency report.\203\ The impacts were estimated on a year-by-year basis,
but could be examined in a combined fashion. Using this method, we
estimate a 12.6 percent reduction in fatality levels between 2007 and
2020 for the combination of safety standards and behavioral changes
anticipated (ESC, head-curtain air bags, and increased belt use). Since
the same safety standards are taking effect in the same years, the
estimates derived from applying NHTSA fatality percentages to a
baseline of 2007 fatalities were thus multiplied by 0.874 to account
for changes that NHTSA believes will take place in passenger car and
light truck safety between the 2007 baseline on-road fleet used for
this particular safety analysis and year 2025.
---------------------------------------------------------------------------
\203\ Countermeasures could potentially involve improved front
end structure, knee bags, seat ramps, buckle pretensioners, and
others.
Blincoe, L. and Shankar, U., ``The Impact of Safety Standards
and Behavioral Trends on Motor Vehicle Fatality Rates,'' DOT HS 810
777, January 2007. See Table 4 comparing 2020 to 2007 (37,906/43,363
= 12.6% reduction (1-.126 = .874). Since 2008 was a recession year,
it does not seem appropriate to use that as a baseline. We believe
this same ratio should hold for this analysis which should compare
2025 to 2008. Thus, we are inclined to continue to use the same
ratio.
---------------------------------------------------------------------------
To estimate the amount of mass reduction to apply in the rulemaking
analysis, the agencies considered fleet safety effects for mass
reduction. As previously discussed and shown in Table II-15, the Kahane
2011 study shows that applying mass reduction to CUVs and light duty
trucks will generally decrease societal fatalities, while applying mass
reduction to passenger cars will increase fatalities. The CAFE model
uses coefficients from the Kahane study along with the mass reduction
level applied to each vehicle model to project societal fatality
effects in each model year. NHTSA used the CAFE model and conducted
iterative modeling runs varying the maximum amount of mass reduction
applied to each subclass in order to identify a combination that
achieved a high level of overall fleet mass reduction while not
adversely affecting overall fleet safety. These maximum levels of mass
reduction for each subclass were then used in the CAFE model for the
rulemaking analysis. The agencies believe that mass reduction of up to
20 percent is feasible on light trucks, CUVs and minivans,\204\ but
that less mass reduction should be implemented on other vehicle types
to avoid increases in societal fatalities. For this proposal, NHTSA
used the mass reduction levels shown in Table II-15.
---------------------------------------------------------------------------
\204\ When applying mass reduction, NHSTA capped the maximum
amount of mass reduction to 20 percent for any individual vehicle
class. The 20 percent cap is the maximum amount of mass reduction
the agencies believe to be feasible in MYs 2017-2025 time frame.
[GRAPHIC] [TIFF OMITTED] TP01DE11.045
For the CAFE model, these percentages apply to a vehicle's total
weight, including the powertrain. Table II-16 shows the amount of mass
reduction in pounds for these percentage mass reduction levels for a
typical vehicle weight in each subclass.
[[Page 74960]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.046
After applying the mass reduction levels in the CAFE model, Table
II-17 shows the results of NHTSA's safety analysis separately for each
model year.\205\ These are estimated increases or decreases in
fatalities over the lifetime of the model year fleet. A positive number
means that fatalities are projected to increase, a negative number
(indicated by parentheses) means that fatalities are projected to
decrease. The results are significantly affected by the assumptions put
into the Volpe model to take more weight out of the heavy LTVs, CUVs,
and minivans than out of other vehicles. As the negative coefficients
only appear for LTVs greater than 4,594 lbs., CUVs, and minivans, a
statistically improvement in safety can only occur if more weight is
taken out of these vehicles than passenger cars or smaller light
trucks. Combining passenger car and light truck safety estimates for
the proposed standards results in an increase in fatalities over the
lifetime of the nine model years of MY 2017-2025 of 4 fatalities,
broken up into an increase of 61 fatalities in passenger cars and 56
decrease in fatalities in light trucks. NHTSA also analyzed the results
for different regulatory alternatives in Chapter IX of its PRIA; the
difference in the results by alternative depends upon how much weight
reduction is used in that alternative and the types and sizes of
vehicles that the weight reduction applies to.
---------------------------------------------------------------------------
\205\ NHTSA has changed the definitions of a passenger car and
light truck for fuel economy purposes between the time of the Kahane
2003 analysis and this proposed rule. About 1.4 million 2 wheel
drive SUVs have been redefined as passenger cars instead of light
trucks. The Kahane 2011 analysis continues with the definitions used
in the Kahane 2003 analysis. Thus, there are different definitions
between Tables IX-1 and IX-2 (which use the old definitions) and
Table IX-3 (which uses the new definitions).
---------------------------------------------------------------------------
[[Page 74961]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.047
Using the same coefficients from the 2011 Kahane study, EPA used
the OMEGA model to conduct a similar analysis. After applying these
percentage increases to the estimated weight reductions per vehicle
size by model year assumed in the Omega model, Table II-18 shows the
results of EPA's safety analysis separately for each model year. These
are estimated increases or decreases in fatalities over the lifetime of
the model year fleet. A positive number means that fatalities are
projected to increase; a negative number means that fatalities are
projected to decrease. For details, see the EPA RIA Chapter 3.
[GRAPHIC] [TIFF OMITTED] TP01DE11.048
b. Why might the real-world effects be less than or greater than what
the agencies have calculated?
As discussed above the ways in which future technological advances
could potentially mitigate the safety effects estimated for this
rulemaking: lightweight vehicles could be designed to be both stronger
and not more aggressive; restraint systems could be improved to deal
with higher crash pulses in lighter vehicles; crash avoidance
technologies could reduce the number of overall crashes; roofs could be
strengthened to improve safety
[[Page 74962]]
in rollovers. As also stated above, however, while we are confident
that manufacturers will strive to build safe vehicles, it will be
difficult for both the agencies and the industry to know with certainty
ahead of time how crash trends will change in the future fleet as
lightweighted vehicles become more prevalent. Going forward, we will
have to continue to monitor the crash data as well as changes in
vehicle weight relative to what we expect.
Additionally, we note that the total amount of mass reduction used
in the agencies' analysis for this rulemaking were chosen based on our
assumptions about how much is technologically feasible without
compromising safety. Again, while we are confident that manufacturers
are motivated to build safe vehicles, we cannot predict with certainty
that they will choose to reduce mass in exactly the ways that the
agencies have analyzed in response to the standards. In the event that
manufacturers ultimately choose to reduce mass and/or footprint in ways
not analyzed by the agencies, the safety effects of the rulemaking may
likely differ from the agencies' estimates.
The agencies acknowledge the proposal does not prohibit
manufacturers from redesigning vehicles to change wheelbase and/or
track width (footprint). However, as NHTSA explained in promulgating
MY2008-2011 light truck CAFE standards and MY2011 passenger car and
light truck CAFE standards, and as the agencies jointly explained in
promulgating MY2012-2016 CAFE and GHG standards, the agencies believes
such engineering changes are significant enough to be unattractive as a
measure to undertake solely to reduce compliance burdens. Similarly,
the agencies acknowledge that a manufacturer could, without actually
reengineering specific vehicles to increase footprint, shift production
toward those that perform well compared to their respective footprint-
based targets. However, NHTSA and, more recently NHTSA and EPA have
previously explained, because such production shifts would run counter
to market demands, they would also be competitively unattractive. Based
on this regulatory design, the analysis assumes this proposal will not
have either of the effects described above.
As discussed in Chapter 2 of the Draft Joint TSD, the agencies note
that the standard is flat for vehicles smaller than 41 square feet and
that downsizing in this category could help achieve overall compliance,
if the vehicles are desirable to consumers. The agencies note that less
than 10 percent of MY2008 passenger cars were below 41 square feet, and
due to the overall lower level of utility of these vehicles, and the
engineering challenges involved in ensuring that these vehicles meet
all applicable federal motor vehicle safety standards (FMVSS), we
expect a significant increase in this segment of the market in the
future is unlikely. Please see Chapter 2 of the Draft Joint TSD for
additional discussion.
We seek comment on the appropriateness of the overall analytic
assumption that the attribute-based aspect of the proposed standards
will have no effect on the overall distribution of vehicle footprints.
Notwithstanding the agencies current judgment that such deliberate
reengineering or production shift are unlikely as pure compliance
strategies, both agencies are considering the potential future
application of vehicle choice models, and anticipate that doing so
could result in estimates that market shifts induced by changes in
vehicle prices and fuel economy levels could lead to changes in fleet's
footprint distribution. However, neither agency is currently able to
include vehicle choice modeling in our analysis.
As discussed in Chapter 2 of the Draft Joint TSD, the agencies note
that the standard is flat for vehicles smaller than 41 square feet and
that downsizing in this category could help achieve overall compliance,
if the vehicles are desirable to consumers. The agencies note that less
than 10 percent of MY2008 passenger cars were below 41 square feet, and
due to the overall lower level of utility of these vehicles, and the
engineering challenges involved in ensuring that these vehicles meet
all applicable federal motor vehicle safety standards (FMVSS), we
expect a significant increase in this segment of the market in the
future is unlikely. Please see Chapter 2 of the Draft Joint TSD for
additional discussion.
c. Do the agencies plan to make any changes in these estimates for the
final rule?
As discussed above, the agencies have based our estimates of safety
effects due to the proposed standards on Kahane's 2011 report. That
report is currently undergoing peer review and is docketed for public
review;\206\ the peer review comments and response to peer review
comments, along with any revisions to the report in response to that
review, will also be docketed there. Depending on the results of the
peer review, our calculation of safety effects for the final rule will
also be revised accordingly. The agencies will also consider any
comments received on the proposed rule, and determine at that time
whether and how our estimates should be changed in response to those
comments. Additional studies published by the agencies or other
independent researchers as previously discussed will also be
considered, along with any other relevant information.
---------------------------------------------------------------------------
\206\ Kahane, C. J. (2011). ``Relationships Between Fatality
Risk, Mass, and Footprint in Model Year 2000-2007 Passenger Cars and
LTVs,'', July 2011. The report is available in the NHTSA docket,
NHTSA-2010-0152. You can access the docket at http://www.regulations.gov/#!home by typing `NHTSA-2010-0152' where it says
``enter keyword or ID'' and then clicking on ``Search.''
---------------------------------------------------------------------------
III. EPA Proposal for MYs 2017-2025 Greenhouse Gas Vehicle Standards
A. Overview of EPA Rule
1. Introduction
Soon after the completion of the successful model years (MYs) 2012-
2016 rulemaking in May 2010, the President, with support from the auto
manufacturers, requested that EPA and NHTSA work to extend the National
Program to MYs 2017-2025 light duty vehicles. The agencies were
requested to develop ``a coordinated national program under the CAA
(Clean Air Act) and the EISA (Energy Independence and Security Act of
2007) to improve fuel efficiency and to reduce greenhouse gas emissions
of passenger cars and light-duty trucks of model years 2017-2025.''
\207\ EPA's proposal grows directly out of our work with NHTSA and CARB
in developing such a continuation of the National Program. This
proposal provides important benefits to society and consumers in the
form of reduced emissions of greenhouse gases (GHGs), reduced
consumption of oil, and fuel savings for consumers, all at reasonable
costs. It provides industry with the important certainty and leadtime
needed to implement the technology changes that will achieve these
benefits, as part of a harmonized set of federal requirements. Acting
now to address the standards for MYs 2017-2025 will allow for the
important continuation of the National Program that started with MYs
2012-2016.
---------------------------------------------------------------------------
\207\ The Presidential Memorandum is found at: http://www.whitehouse.gov/the-press-office/presidential-memorandum-regarding-fuel-efficiency-standards.
---------------------------------------------------------------------------
EPA is proposing GHG emissions standards for light-duty vehicles,
light-duty trucks, and medium-duty passenger vehicles (hereafter light
vehicles) for MYs 2017 through 2025. These vehicle categories, which
include cars, sport utility vehicles, minivans, and pickup trucks used
for personal
[[Page 74963]]
transportation, are responsible for almost 60% of all U.S.
transportation related GHG emissions.
If finalized, this proposal would be the second EPA rule to
regulate light vehicle GHG emissions under the Clean Air Act (CAA),
building upon the GHG emissions standards for MYs 2012-2016 that were
established in 2010,\208\ and the third rule to regulate GHG emissions
from the transportation sector.\209\ Combined with the standards
already in effect for MYs 2012-2016, the proposed standards would
result in MY 2025 light vehicles emitting approximately one-half of the
GHG emissions of MY 2010 vehicles and would represent the most
significant federal action ever taken to reduce GHG emissions (and
improve fuel economy) in the U.S.
---------------------------------------------------------------------------
\208\ 75 FR 25324 (May 7, 2010).
\209\ 76 FR 57106 (September 15, 2011) established GHG emission
standards for heavy-duty vehicles and engines for model years 2014-
2018.
---------------------------------------------------------------------------
From a societal standpoint, the proposed GHG emissions standards
are projected to save approximately 2 billion metric tons of GHG
emissions and 4 billion barrels of oil over the lifetimes of those
vehicles sold in MYs 2017-2025. EPA estimates that fuel savings will
far outweigh higher vehicle costs, and that the net benefits to society
will be in the range of $311 billion (at 7% discount rate) to $421
billion (3% discount) over the lifetimes of those vehicles sold in MYs
2017-2025. Just in calendar year 2040 alone, after the on-road vehicle
fleet has largely turned over to vehicles sold in MY 2025 and later,
EPA projects GHG emissions savings of 462 million metric tons, oil
savings of 2.63 million barrels per day, and net benefits of $144
billion using the $22/ton CO2 social cost of carbon value.
EPA estimates that these proposed standards will save consumers
money. Higher costs for new technology, sales taxes, and insurance will
add, on average in the first year, about $2100 for consumers who buy a
new vehicle in MY 2025. But those consumers who drive their MY 2025
vehicle for its entire lifetime will save, on average, $5200 (7%
discount rate) to $6600 (3% discount) in fuel savings, for a net
lifetime savings of $3000-$4400. For those consumers who purchase their
new MY 2025 vehicle with cash, the discounted fuel savings will offset
the higher vehicle cost in less than 4 years, and fuel savings will
continue for as long as the consumer owns the vehicle. Those consumers
that buy a new vehicle with a 5-year loan will benefit from a monthly
cash flow savings of $12 (or about $140 per year), on average, as the
monthly fuel savings more than offsets the higher monthly payment due
to the higher incremental vehicle cost.
The proposed standards are designed to allow full consumer choice,
in that they are footprint-based, i.e., larger vehicles have higher
absolute GHG emissions targets and smaller vehicles have lower absolute
GHG emissions targets. While the GHG emissions targets do become more
stringent each year, the emissions targets have been selected to allow
compliance by vehicles of all sizes and with current levels of vehicle
attributes such as utility, size, safety, and performance. Accordingly,
these proposed standards are projected to allow consumers to choose
from the same mix of vehicles that are currently in the marketplace.
Section I above provides a comprehensive overview of the joint EPA/
NHTSA proposal, including the history and rationale for a National
Program that allows manufacturers to build a single fleet of light
vehicles that can satisfy all federal and state requirements for GHG
emissions and fuel economy, the level and structure of the proposed GHG
emissions and corporate average fuel economy (CAFE) standards, the
compliance flexibilities proposed to be available to manufacturers, the
mid-term evaluation, and a summary of the costs and benefits of the GHG
and CAFE standards based on a ``model year lifetime analysis.''
In this Section III, EPA provides more detailed information about
EPA's proposed GHG emissions standards. After providing an overview of
key information in this section (III.A), EPA discusses the proposed
standards (III.B); the vehicles covered by the standards, various
compliance flexibilities available to manufacturers, and a mid-term
evaluation (III.C); the feasibility of the proposed standards (III.D);
provisions for certification, compliance, and enforcement (III.E); the
reductions in GHG emissions projected for the proposed standards and
the associated effects of these reductions (III.F); the impact of the
proposal on non-GHG emissions and their associated effects (III.G); the
estimated cost, economic, and other impacts of the proposal (III.H);
and various statutory and executive order issues (III.I).
2. Why is EPA proposing this Rule?
a. Light Duty Vehicle Emissions Contribute to Greenhouse Gases and the
Threat of Climate Change
Greenhouse gases (GHGs) are gases in the atmosphere that
effectively trap some of the Earth's heat that would otherwise escape
to space. GHGs are both naturally occurring and anthropogenic. The
primary GHGs of concern that are directly emitted by human activities
include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons,
perfluorocarbons, and sulfur hexafluoride.
These gases, once emitted, remain in the atmosphere for decades to
centuries. They become well mixed globally in the atmosphere and their
concentrations accumulate when emissions exceed the rate at which
natural processes remove GHGs from the atmosphere. The heating effect
caused by the human-induced buildup of GHGs in the atmosphere is very
likely the cause of most of the observed global warming over the last
50 years. The key effects of climate change observed to date and
projected to occur in the future include, but are not limited to, more
frequent and intense heat waves, more severe wildfires, degraded air
quality, heavier and more frequent downpours and flooding, increased
drought, greater sea level rise, more intense storms, harm to water
resources, continued ocean acidification, harm to agriculture, and harm
to wildlife and ecosystems. A more in depth explanation of observed and
projected changes in GHGs and climate change, and the impact of climate
change on health, society, and the environment is included in Section
III.F below.
Mobile sources represent a large and growing share of U.S. GHG
emissions and include light-duty vehicles, light-duty trucks, medium
duty passenger vehicles, heavy duty trucks, airplanes, railroads,
marine vessels and a variety of other sources. In 2007, all mobile
sources emitted 30% of all U.S. GHGs, and have been the source of the
largest absolute increase in U.S. GHGs since 1990. Transportation
sources, which do not include certain off highway sources such as farm
and construction equipment, account for 27% of U.S. GHG emissions, and
motor vehicles (CAA section 202(a)), which include light-duty vehicles,
light-duty trucks, medium-duty passenger vehicles, heavy-duty trucks,
buses, and motorcycles account for 23% of total U.S. GHGs.
Light duty vehicles emit carbon dioxide, methane, nitrous oxide and
hydrofluorocarbons. Carbon dioxide (CO2) is the end product of fossil
fuel combustion. During combustion, the carbon stored in the fuels is
oxidized and emitted as CO2 and smaller amounts of other carbon
compounds. Methane (CH4) emissions are a function of the methane
content of the motor fuel, the amount of hydrocarbons passing
uncombusted through the
[[Page 74964]]
engine, and any post-combustion control of hydrocarbon emissions (such
as catalytic converters). Nitrous oxide (N2O) (and nitrogen
oxide (NOX)) emissions from vehicles and their engines are
closely related to air-fuel ratios, combustion temperatures, and the
use of pollution control equipment. For example, some types of
catalytic converters installed to reduce motor vehicle NOX,
carbon monoxide (CO) and hydrocarbon (HC) emissions can promote the
formation of N2O. Hydrofluorocarbons (HFC) are progressively
replacing chlorofluorocarbons (CFC) and hydrochlorofluorocarbons (HCFC)
in these vehicles' cooling and refrigeration systems as CFCs and HCFCs
are being phased out under the Montreal Protocol and Title VI of the
CAA. There are multiple emissions pathways for HFCs with emissions
occurring during charging of cooling and refrigeration systems, during
operations, and during decommissioning and disposal.
b. Basis for Action Under the Clean Air Act
Section 202(a)(1) of the Clean Air Act (CAA) states that ``the
Administrator shall by regulation prescribe (and from time to time
revise) * * * standards applicable to the emission of any air pollutant
from any class or classes of new motor vehicles * * *, which in his
judgment cause, or contribute to, air pollution which may reasonably be
anticipated to endanger public health or welfare.'' The Administrator
has found that the elevated concentrations of a group of six GHGs in
the atmosphere may reasonably be anticipated to endanger public health
and welfare, and that emissions of GHGs from new motor vehicles and new
motor vehicle engines contribute to this air pollution.
As a result of these findings, section 202(a) requires EPA to issue
standards applicable to emissions of that air pollutant, and authorizes
EPA to revise them from time to time. This preamble describes the
proposed revisions to the current standards to control emissions of CO2
and HFCs from new light-duty motor vehicles.\210\ For further
discussion of EPA's authority under section 202(a), see Section I.D. of
the preamble.
---------------------------------------------------------------------------
\210\ EPA is not proposing to amend the substantive standards
adopted in the 2012-2016 light-duty vehicle rule for N2O
and CH4, but is proposing revisions to the options that
manufacturers have in meeting the N2O and CH4 standards, and to the
timeframe for manufacturers to begin measuring N2O emissions. See
Section III.B below.
---------------------------------------------------------------------------
c. EPA's Endangerment and Cause or Contribute Findings for Greenhouse
Gases Under Section 202(a) of the Clean Air Act
On December 15, 2009, EPA published its findings that elevated
atmospheric concentrations of GHGs are reasonably anticipated to
endanger the public health and welfare of current and future
generations, and that emissions of GHGs from new motor vehicles
contribute to this air pollution. Further information on these findings
may be found at 74 FR 66496 (December 15, 2009) and 75 FR 49566 (Aug.
13, 2010).
3. What is EPA proposing?
a. Light-Duty Vehicle, Light-Duty Truck, and Medium-Duty Passenger
Vehicle Greenhouse Gas Emission Standards and Projected Emissions
Levels
EPA is proposing tailpipe carbon dioxide (CO2) standards
for cars and light trucks based on the CO2 emissions-
footprint curves for cars and light trucks that are shown above in
Section I.B.3 and below in Section III.B. These curves establish
different CO2 emissions targets for each unique car and
truck footprint value. Generally, the larger the vehicle footprint, the
higher the corresponding vehicle CO2 emissions target.
Vehicle CO2 emissions will be measured over the EPA city and
highway tests. Under this proposal, various incentives and credits are
available for manufacturers to demonstrate compliance with the
standards. See Section I.B for a comprehensive overview of both the EPA
CO2 emissions-footprint standard curves and the various
compliance flexibilities that are proposed to be available to the
manufacturers in meeting the EPA tailpipe CO2 standards.
EPA projects that the proposed tailpipe CO2 emissions-
footprint curves would yield a fleetwide average light vehicle
CO2 emissions compliance target level in MY 2025 of 163
grams per mile, which would represent an average reduction of 35
percent relative to the projected average light vehicle CO2
level in MY 2016. On average, car CO2 emissions would be
reduced by about 5 percent per year, while light truck CO2 emissions
would be reduced by about 3.5 percent per year from MY 2017 through
2021, and by about 5 percent per year from MY 2022 through 2025.
The following three tables, Table III-1 through Table III-3,
summarize EPA's projections of what the proposed standards would mean
in terms of projected CO2 emissions reductions for passenger
cars, light trucks, and the overall fleet combining passenger cars and
light trucks for MYs 2017-2025. It is important to emphasize that these
projections are based on technical assumptions by EPA about various
matters, including the mix of cars and trucks, as well as the mix of
vehicle footprint values, in the fleet in varying years. It is possible
that the actual CO2 emissions values will be either higher
or lower than the EPA projections.
In each of these tables, the column ``Projected CO2
Compliance Target'' represents our projected fleetwide average
CO2 compliance target value based on the proposed
CO2-footprint curve standards as well as the projected mixes
of cars and trucks and vehicle footprint levels. This Compliance Target
represents the projected fleetwide average of the projected standards
for the various manufacturers.
The column(s) under ``Incentives'' represent the emissions impact
of the proposed multiplier incentive for EV/PHEV/FCVs and the proposed
pickup truck incentives. These incentives allow manufacturers to meet
their Compliance Targets with CO2 emissions levels slightly higher than
they would otherwise have to be, but do not reflect actual real-world
CO2 emissions reductions. As such they reduce the emissions
reductions that the CO2 standards would be expected to
achieve.
The column ``Projected Achieved CO2'' is the sum of the
CO2 Compliance Target and the value(s) in the ``Incentive''
columns. This Achieved CO2 value is a better reflection of
the CO2 emissions benefits of the standards, since it
accounts for the incentive programs. One incentive that is not
reflected in these tables is the 0 gram per mile compliance value for
EV/PHEV/FCVs. The 0 gram per mile value accurately reflects the
tailpipe CO2 gram per mile achieved by these vehicles;
however, the use of this fuel does impact the overall GHG reductions
associated with the proposed standards due to fuel production and
distribution-related upstream GHG emissions which are projected to be
greater than the upstream GHG emissions associated with gasoline from
oil. The combined impact of the 0 gram per mile and multiplier
incentive for EV/PHEV/FCVs on overall program GHG emissions is
discussed in more detail below in Section III.C.2.
The columns under ``Credits'' quantify the projected CO2
emissions credits that we project manufacturers will achieve through
improvements in air conditioner refrigerants and efficiency. These
credits reflect real world emissions reductions, so they do not raise
the levels of the Achieved CO2 values, but they do allow
manufacturers to comply with their compliance targets with 2-cycle test
CO2 emissions values
[[Page 74965]]
higher than otherwise. One other credit program that could similarly
affect the 2-cycle CO2 values is the off-cycle credit
program, but it is not included in this table due to the uncertainty
inherent in projecting the future use of these technologies. The off-
cycle credits, like A/C credits, reflect real world reductions, so they
would not change the CO2 Achieved values.
The column ``Projected 2-cycle CO2'' is the projected fleetwide 2-
cycle CO2 emissions values that manufacturers would have to
achieve in order to be able to comply with the proposed standards. This
value is the sum of the projected fleetwide credit, incentive, and
Compliance Target values.\211\
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\211\ For MY 2016, the Temporary Leadtime Allowance Alternative
Standards are available to manufacturers. In the MYs 2012-2016 rule,
we estimated the impact of this credit in MY 2016 to be 0.1 gram/
mile. Due to the small magnitude, we have not included this in the
following tables for the MY 2016 base year.
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BILLING CODE 4910-59-C
Table III-4 shows the projected real world CO2 emissions
and fuel economy values associated with the proposed CO2
standards. These real world estimates, similar to values shown on new
vehicle labels, reflect the fact that the way cars and trucks are
operated in the real world generally results in higher CO2
emissions and lower fuel economy than laboratory test results used to
determine compliance with the standards, which are performed under
tightly controlled conditions. There are many assumptions that must be
made for these projections, and real world CO2 emissions and
fuel economy performance can vary based on many factors.
The real world tailpipe CO2 emissions projections in
Table III-4 are calculated starting with the projected 2-cycle
CO2 emissions values in Table III-1 through Table III-3,
subtracting the air conditioner efficiency credits, and then
multiplying by a factor of 1.25. The 1.25 factor is an approximation of
the ratio of real world CO2 emissions to 2-cycle test
CO2 emissions for the fleet in the
[[Page 74968]]
recent past. It is not possible to know the appropriate factor for
future vehicle fleets, as this factor will depend on many factors such
as technology performance, driver behavior, climate conditions, fuel
composition, etc. Issues associated with future projections of this
factor are discussed in TSD 4. Air conditioner efficiency credits were
subtracted from the 2-cycle CO2 emissions values as air
conditioning efficiency improvements will increase real world fuel
economy. The real world fuel economy value is calculated by dividing
8887 grams of CO2 per gallon of gasoline by the real world
tailpipe CO2 emissions value.
[GRAPHIC] [TIFF OMITTED] TP01DE11.054
As discussed both in Section I and later in this Section III, EPA
either already has adopted or is proposing provisions for averaging,
banking, and trading of credits, that allow annual credits for a
manufacturer's over-compliance with its unique fleet-wide average
standard, carry-forward and carry-backward of credits, the ability to
transfer credits between a manufacturer's car and truck fleets, and
credit trading between manufacturers. EPA is proposing a one-time
carry-forward of any credits such that any credits generated in MYs
2010-2016 can be used through MY 2021. These provisions are not
expected to change the emissions reductions achieved by the standards,
but should significantly reduce the cost of achieving those reductions.
The tables above do not reflect the year to year impact of these
provisions. For example, EPA expects that many manufacturers may
generate credits by over complying with the standards for cars, and
transfer such credits to its truck fleet. Table III-1 (cars) and Table
III-2 (trucks) do not reflect such transfers. If on an industry wide
basis more credits are transferred from cars to trucks than vice versa,
you would expect to achieve greater reductions from cars than reflected
in Table III-1 (lower CO2 gram/miles values) and less
reductions from trucks than reflected in Table III-2 (higher
CO2 gram/mile values). Credit transfers between cars and
trucks would not be expected to change the results for the combined
fleet, reflected in Table III-3.
The proposed rule would also exclude from coverage a limited set of
vehicles: emergency and police vehicles, and vehicles manufactured by
small businesses. As discussed in Section III.B below, these exclusions
have very limited impact on the total GHG emissions reductions from the
light-
[[Page 74969]]
duty vehicle fleet. We also do not anticipate significant impacts on
total GHG emissions reductions from the proposed provisions allowing
small volume manufacturers to petition EPA for alternative standards.
See Section III.B.5 below.
b. Environmental and Economic Benefits and Costs of EPA's Standards
i. Model Year Lifetime Analysis
Section I.C provides a comprehensive discussion of the projected
benefits and costs associated with the proposed MYs 2017-2025 GHG and
CAFE standards based on a ``model year lifetime'' analysis, i.e., the
benefits and costs associated with the lifetime operation of the new
vehicles sold in these nine model years. It is important to note that
while the incremental vehicle costs associated with MY 2017 vehicles
will in fact occur in calendar year 2017, the benefits associated with
MY 2017 vehicles will be split among all the calendar years from 2017
through the calendar year during which the last MY 2017 vehicle would
be retired.
Table III-5 provides a summary of the GHG emissions and oil savings
associated with the lifetime operation of all the vehicles sold in each
model year. Cumulatively, for the nine model years from 2017 through
2025, the proposed standards are projected to save approximately 2
billion metric tons of GHG emissions and 4 billion barrels of oil.
Table III-6 provides a summary of the most important projected
economic impacts of the proposed GHG emissions standards based on this
model year lifetime analytical approach. These monetized dollar values
are all discounted to the first year of each model year, then summed up
across all model years. With a 3% discount rate, cumulative incremental
vehicle technology cost for MYs 2017-2025 vehicles is $140 billion,
fuel savings is $444 billion, other monetized benefits are $117
billion, and program net benefits are projected to be $421 billion.
Using a 7% discount rate, the projected program net benefits are $311
billion.
As discussed previously, EPA recognizes that some of these same
benefits and costs are also attributable to the CAFE standard contained
in this joint proposal, although the GHG program achieves greater
reductions of both GHG emissions and petroleum. More details associated
with this model year lifetime analysis of the proposed GHG standards
are presented in Sections III.F and III.H.
[GRAPHIC] [TIFF OMITTED] TP01DE11.055
ii. Calendar Year Analysis
In addition to the model year lifetime analysis projections
summarized above, EPA also performs a ``calendar year'' analysis that
projects the environmental and economic impacts associated with the
proposed tailpipe CO2 standards during specific calendar
years out to 2050. This calendar year approach reflects the timeframe
when the benefits would be achieved and the costs incurred. Because the
EPA tailpipe CO2 emissions standards will remain in effect
unless and until they are changed, the projected impacts in this
calendar year analysis beyond calendar year 2025 reflect vehicles sold
in model years after 2025 (e.g., most of the benefits in calendar year
2040 would be due to vehicles sold after MY 2025).
Table III-7 provides a summary of the most important projected
benefits and costs of the proposed EPA GHG emissions standards based on
this calendar year analysis. In calendar year 2025, EPA projects GHG
savings of 151 million metric tons and oil savings of 0.83 million
barrels per day. These would grow to 547 million metric tons of GHG
savings and 3.12 million barrels of oil per day by calendar year 2050.
Program net benefits are projected to be $18 billion in calendar year
2025, growing to $198 billion in calendar year 2050. Program net
benefits over the 34-year period from 2017 through 2050 are projected
to have a net present value in 2012 of $600 billion (7% discount rate)
to $1.4 trillion (3% discount rate).
More details associated with this calendar year analysis of the
proposed
[[Page 74970]]
GHG standards are presented in Sections III.F and III.H.
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[[Page 74971]]
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BILLING CODE 4910-59-C
iii. Consumer Analysis
The model year lifetime and calendar year analytical approaches
discussed above aggregate the environmental and economic impacts across
the nationwide light vehicle fleet. EPA has also projected the average
impact of the proposed GHG standards on individual consumers who own
and drive MY 2025 light vehicles over their lifetimes.
Table III-8 shows, on average, several key consumer impacts
associated with the proposed tailpipe CO2 standard for
[[Page 74972]]
MY 2025 vehicles. Some of these factors are dependent on the assumed
discount factors, and this table uses the same 3% and 7% discount
factors used throughout this preamble. EPA uses AEO2011 fuel price
projections of $3.25 per gallon in calendar year 2017, rising to $3.54
per gallon in calendar year 2025 and $3.85 per gallon in calendar year
2040.
EPA projects that the new technology necessary to meet the proposed
MY 2025 standard would add, on average, an extra $1950 (including
markup) to the sticker price of a new MY 2025 light-duty vehicle.
Including higher vehicle sales taxes and first-year insurance costs,
the projected incremental first-year cost to the consumer is about
$2100 on average. The projected incremental lifetime vehicle cost to
the consumer, reflecting higher insurance premiums over the life of the
vehicle, is, on average, about $2200. For all of the consumers who
drive MY 2025 light-duty vehicles, the proposed standards are projected
to yield a net savings of $3000 (7% discount rate) to $4400 (3%
discount) over the lifetime of the vehicle, as the discounted lifetime
fuel savings of $5200-$6600 is 2.4 to 3 times greater than the $2200
incremental lifetime vehicle cost to the consumer.
Of course, many vehicles are owned by more than one consumer. The
payback period and monthly cash flow approaches are two ways to
evaluate the economic impact of the MY 2025 standard on those new car
buyers who do not own the vehicle for its entire lifetime. Projected
payback periods of 3.7-3.9 years means that, for a consumer that buys a
new vehicle with cash, the discounted fuel savings for that consumer
would more than offset the incremental lifetime vehicle cost in 4
years. If the consumer owns the vehicle beyond this payback period, the
vehicle will save money for the consumer. For a consumer that buys a
new vehicle with a 5-year loan, the monthly cash flow savings of $12
(or about $140 per year) shows that the consumer would benefit
immediately as the monthly fuel savings more than offsets the higher
monthly payment due to the higher incremental first-year vehicle cost.
The final entries in Table III-8 show the CO2 and oil
savings that would be associated with the MY 2025 vehicles on average,
both on a lifetime basis and in the first full year of operation. On
average, a consumer who owns a MY 2025 vehicle for its entire lifetime
is projected to emit 20 fewer metric tons of CO2 and consume
2200 fewer gallons of gasoline due to the proposed standards.
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[[Page 74973]]
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[[Page 74974]]
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BILLING CODE 4910-59-C
4. Basis for the GHG Standards Under Section 202(a)
EPA has significant discretion under section 202(a) of the Act in
how to structure the standards that apply to the emission of the air
pollutant at issue here, the aggregate group of six GHGs, as well as to
the content of such standards. See generally 74 FR at 49464-65. EPA
statutory authority under section 202(a)(1) of the Clean Air Act (CAA)
is discussed in more detail in Section I.D of the preamble. In this
rulemaking, EPA is proposing a CO2 tailpipe emissions
standard that provides for credits based on reductions of HFCs, as the
appropriate way to issue standards applicable to emissions of the
single air pollutant, the aggregate group of six GHGs. EPA is not
proposing to change the methane and nitrous oxide standards already in
place (although EPA is proposing certain changes to the compliance
mechanisms for these standards as explained in Section III.B below).
EPA is not setting any standards for perfluorocarbons or sulfur
hexafluoride, as they are not emitted by motor vehicles. The following
is a summary of the basis for the proposed GHG standards under section
202(a), which is discussed in more detail in the following portions of
Section III.
With respect to CO2 and HFCs, EPA is proposing
attribute-based light-duty car and truck standards that achieve large
and important emissions reductions of GHGs. EPA has evaluated the
technological feasibility of the standards, and the information and
analysis performed by EPA indicates that these standards are feasible
in the lead time provided. EPA and NHTSA have carefully evaluated the
effectiveness of individual technologies as well as the interactions
when technologies are combined. EPA projects that manufacturers will be
able to meet the standards by employing a wide variety of technologies
that are already commercially available. EPA's analysis also takes into
account certain flexibilities that will facilitate compliance. These
flexibilities include averaging, banking, and trading of various types
of credits. For a few very small volume manufacturers, EPA is proposing
to allow manufacturers to petition for alternative standards.
EPA, as a part of its joint technology analysis with NHTSA, has
performed what we believe is the most comprehensive federal vehicle
technology analysis in history. We carefully considered the cost to
manufacturers of meeting the standards, estimating piece costs for all
candidate technologies, direct manufacturing costs, cost markups to
account for manufacturers' indirect costs, and manufacturer cost
reductions attributable to learning. In estimating manufacturer costs,
EPA took into account manufacturers' own practices such as making major
changes to vehicle technology packages during a planned redesign cycle.
EPA then projected the average cost across the industry to employ this
technology, as well as manufacturer-by-manufacturer costs. EPA
considers the per vehicle costs estimated by this analysis to be within
a reasonable range in light of the emissions reductions and benefits
achieved. EPA projects, for example, that the fuel savings over the
life of the vehicles will more than offset the increase in cost
associated with the technology used to meet the standards. As explained
in Section III.D.6 below, EPA has also investigated potential standards
both more and less stringent than those being proposed and has rejected
them. Less stringent standards would forego emission reductions which
are feasible, cost effective, and cost feasible, with short consumer
payback periods. EPA judges that the proposed standards are appropriate
and preferable to more stringent alternatives based largely on
consideration of cost--both to manufacturers and to consumers--and the
potential for overly aggressive penetration rates for advanced
technologies relative to the penetration rates seen in the proposed
standards, especially in the face of unknown degree of consumer
acceptance of both the increased costs and the technologies themselves.
EPA has also evaluated the impacts of these standards with respect
to reductions in GHGs and reductions in oil usage. For the lifetime of
the model year 2017-2025 vehicles we estimate GHG reductions of
approximately 2 billion metric tons and fuel reductions of about 4
billion barrels of oil. These are important and significant reductions.
EPA has also analyzed a variety of other impacts of the standards,
ranging from the standards' effects on emissions of non-GHG pollutants,
impacts on noise, energy, safety and congestion. EPA has also
quantified the cost and benefits of the standards, to the extent
practicable. Our
[[Page 74975]]
analysis to date indicates that the overall quantified benefits of the
standards far outweigh the projected costs. We estimate the total net
social benefits (lifetime present value discounted to the first year of
the model year) over the life of MY 2017-2025 vehicles to be $421
billion with a 3% discount rate and $311 billion with a 7% discount
rate.
Under section 202(a), EPA is called upon to set standards that
provide adequate lead-time for the development and application of
technology to meet the standards. EPA's standards satisfy this
requirement given the present existence of the technologies on which
the proposed rule is predicated and the substantial lead times afforded
under the proposal (which by MY2025 allow for multiple vehicle redesign
cycles and so affords opportunities for adding technologies in the most
cost efficient manner, see 75 FR at 25407). In setting the standards,
EPA is called upon to weigh and balance various factors, and to
exercise judgment in setting standards that are a reasonable balance of
the relevant factors. In this case, EPA has considered many factors,
such as cost, impacts on emissions (both GHG and non-GHG), impacts on
oil conservation, impacts on noise, energy, safety, and other factors,
and has where practicable quantified the costs and benefits of the
proposed rule. In summary, given the technical feasibility of the
standard, the cost per vehicle in light of the savings in fuel costs
over the lifetime of the vehicle, the very significant reductions in
emissions and in oil usage, and the significantly greater quantified
benefits compared to quantified costs, EPA is confident that the
standards are an appropriate and reasonable balance of the factors to
consider under section 202(a). See Husqvarna AB v. EPA, 254 F. 3d 195,
200 (DC Cir. 2001) (great discretion to balance statutory factors in
considering level of technology-based standard, and statutory
requirement ``to [give appropriate] consideration to the cost of
applying * * * technology'' does not mandate a specific method of cost
analysis); see also Hercules Inc. v. EPA, 598 F. 2d 91, 106 (DC Cir.
1978) (``In reviewing a numerical standard we must ask whether the
agency's numbers are within a zone of reasonableness, not whether its
numbers are precisely right''); Permian Basin Area Rate Cases, 390 U.S.
747, 797 (1968) (same); Federal Power Commission v. Conway Corp., 426
U.S. 271, 278 (1976) (same); Exxon Mobil Gas Marketing Co. v. FERC, 297
F. 3d 1071, 1084 (DC Cir. 2002) (same).
EPA recognizes that most of the technologies that we are
considering for purposes of setting standards under section 202(a) are
commercially available and already being utilized to a limited extent
across the fleet, or will soon be commercialized by one or more major
manufacturers. The vast majority of the emission reductions that would
result from this rule would result from the increased use of these
technologies. EPA also recognizes that this rule would enhance the
development and commercialization of more advanced technologies, such
as PHEVs and EVs and strong hybrids as well. In this technological
context, there is no clear cut line that indicates that only one
projection of technology penetration could potentially be considered
feasible for purposes of section 202(a), or only one standard that
could potentially be considered a reasonable balancing of the factors
relevant under section 202(a). EPA therefore evaluated several
alternative standards, some more stringent than the promulgated
standards and some less stringent.
See Section III.D.6 for EPA's analysis of alternative GHG emissions
standards.
5. Other Related EPA Motor Vehicle Regulations
a. EPA's Recent Heavy-Duty GHG Emissions Rulemaking
EPA and NHTSA recently conducted a joint rulemaking to establish a
comprehensive Heavy-Duty National Program that will reduce greenhouse
gas emissions and fuel consumption for on-road heavy-duty vehicles
beginning in MY 2014 (76 FR 57106 (September 15, 2011)). EPA's final
carbon dioxide (CO2), nitrous oxide (N2O), and
methane (CH4) emissions standards, along with NHTSA's final
fuel consumption standards, are tailored to each of three regulatory
categories of heavy-duty vehicles: (1) Combination Tractors; (2) Heavy-
duty Pickup Trucks and Vans; and (3) Vocational Vehicles. The rules
include separate standards for the engines that power combination
tractors and vocational vehicles. EPA also set hydrofluorocarbon
standards to control leakage from air conditioning systems in
combination tractors and heavy-duty pickup trucks and vans.
The agencies estimate that the combined standards will reduce
CO2 emissions by approximately 270 million metric tons and
save 530 million barrels of oil over the life of vehicles sold during
the 2014 through 2018 model years, providing $49 billion in net
societal benefits when private fuel savings are considered. See 76 FR
at 57125-27.
b. EPA's Plans for Further Standards for Light Vehicle Criteria
Pollutants and Gasoline Fuel Quality
In the May 21, 2010 Presidential Memorandum, in addition to
addressing GHGs and fuel economy, the President also requested that EPA
examine its broader motor vehicle air pollution control program. The
President requested that ``[t]he Administrator of the EPA review for
adequacy the current nongreenhouse gas emissions regulations for new
motor vehicles, new motor vehicle engines, and motor vehicle fuels,
including tailpipe emissions standards for nitrogen oxides and air
toxics, and sulfur standards for gasoline. If the Administrator of the
EPA finds that new emissions regulations are required, then I request
that the Administrator of the EPA promulgate such regulations as part
of a comprehensive approach toward regulating motor vehicles.'' \214\
EPA is currently in the process of conducting an assessment of the
potential need for additional controls on light-duty vehicle non-GHG
emissions and gasoline fuel quality. EPA has been actively engaging in
technical conversations with the automobile industry, the oil industry,
nongovernmental organizations, the states, and other stakeholders on
the potential need for new regulatory action, including the areas that
are specifically mentioned in the Presidential Memorandum. EPA will
coordinate all future actions in this area with the State of
California.
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\214\ The Presidential Memorandum is found at: http://www.whitehouse.gov/the-press-office/presidential-memorandum-regarding-fuel-efficiency-standards.
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Based on this assessment, in the near future, EPA expects to
propose a separate but related program that would, in general, affect
the same set of new vehicles on the same timeline as would the proposed
light-duty GHG emissions standards. It would be designed to address air
quality problems with ozone and PM, which continue to be serious
problems in many parts of the country, and light-duty vehicles continue
to play a significant role.
EPA expects that this related program, called ``Tier 3'' vehicle
and fuel standards, would among other things propose tailpipe and
evaporative standards to reduce non-GHG pollutants from light-duty
vehicles, including volatile organic compounds, nitrogen oxides,
particulate matter, and air toxics. EPA's intent, based on extensive
interaction to date with the automobile manufacturers and other
stakeholders, is to propose a Tier 3 program that would allow
manufacturers to proceed with
[[Page 74976]]
coordinated future product development plans with a full understanding
of the major regulatory requirements they will be facing over the long
term. This coordinated regulatory approach would allow manufacturers to
design their future vehicles so that any technological challenges
associated with meeting both the GHG and Tier 3 standards could be
efficiently addressed.
It should be noted that under EPA's current regulations, GHG
emissions and CAFE compliance testing for gasoline vehicles is
conducted using a defined fuel that does not include any amount of
ethanol.\215\ If the certification test fuel is changed to some
ethanol-based fuel through a future rulemaking, EPA would be required
under EPCA to address the need for a test procedure adjustment to
preserve the level of stringency of the CAFE standards.\216\ EPA is
committed to doing so in a timely manner to ensure that any change in
certification fuel will not affect the stringency of future GHG
emission standards.
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\215\ See 40 CFR 86.113-94(a).
\216\ EPCA requires that CAFE tests be determined from the EPA
test procedures in place as of 1975, or procedures that give
comparable results. 49 USC 32904(c).
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B. Proposed Model Year 2017-2025 GHG Standards for Light-duty Vehicles,
Light-duty Trucks, and Medium duty Passenger Vehicles
EPA is proposing new emissions standards to control greenhouse
gases (GHGs) from MY 2017 and later light-duty vehicles. EPA is
proposing new emission standards for carbon dioxide (CO2) on
a gram per mile (g/mile) basis that will apply to a manufacturer's
fleet of cars, and a separate standard that will apply to a
manufacturer's fleet of trucks. CO2 is the primary
greenhouse gas resulting from the combustion of vehicular fuels, and
the amount of CO2 emitted is directly correlated to the
amount of fuel consumed. EPA is proposing to conduct a mid-term
evaluation of the GHG standards and other requirements for MYs 2022-
2025, as further discussed in Section III.B.3 below.
EPA is not proposing changes to the CH4 and
N2O emissions standards, but is proposing revisions to the
options that manufacturers have in meeting the CH4 and
N2O standards, and to the timeframe for manufacturers to
begin measuring N2O emissions. These proposed changes are
not intended to change the stringency of the CH4 and
N2O standards, but are aimed at addressing implementation
concerns regarding the standards.
The opportunity to earn credits toward the fleet-wide average
CO2 standards for improvements to air conditioning systems
remains in place for MY 2017 and later, including improvements to
address both hydrofluorocarbon (HFC) refrigerant losses (i.e., system
leakage) and indirect CO2 emissions related to the air
conditioning efficiency and load on the engine. The CO2
standards proposed for cars and trucks take into account EPA's
projection of the average amount of credits expected to be generated
across the industry. EPA is proposing several revisions to the air
conditioning credits provisions, as discussed in Section III.C.1.
The MY 2012-2016 Final Rule established several program elements
that remain in place, where EPA is not proposing significant changes.
The proposed standards described below would apply to passenger cars,
light-duty trucks, and medium-duty passenger vehicles (MDPVs). As an
overall group, they are referred to in this preamble as light-duty
vehicles or simply as vehicles. In this preamble section, passenger
cars may be referred to simply as ``cars'', and light-duty trucks and
MDPVs as ``light trucks'' or ``trucks.'' \217\
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\217\ GHG emissions standards would use the same vehicle
category definitions used for MYs 2012-2016 and as are used in the
CAFE program.
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EPA is not proposing changes to the averaging, banking, and trading
program elements, as discussed in Section III.B.4, with the exception
of our proposal for a one-time carry-forward of any credits generated
in MY 2010-2016 to be used anytime through MY2021. The previous
rulemaking also established provisions for MY 2016 and later FFVs,
where the emissions levels of these vehicles are based on tailpipe
emissions performance and the amount of alternative fuel used. These
provisions remain in place without change.
Several provisions are being proposed that allow manufacturer's to
generate credits for use in complying with the standards or that
provide additional incentives for use of advanced technology. These
include credits for technology that reduces CO2 emissions
during off-cycle operation that is not reasonably accounted for by the
2-cycle tests used for compliance purposes. EPA is proposing various
changes to this program to streamline its use compared to the MYs 2012-
2016 program. These provisions are discussed in section III.C. In
addition, EPA is proposing the use of multipliers to provide an
incentive for the use of EVs, PHEVs, and FCVs, as well as a specified
gram/mile credit for full size pick-up trucks that meet various
efficiency performance criteria and/or include hybrid technology at a
minimum level of production volumes. These provisions are also
discussed in Section III.C. As discussed in those sections, while these
additional credit provisions do not change the level of the standards
proposed for cars and trucks, unlike the provisions for AC credits,
they all support the reasonableness of the standards proposed for MYs
2017-2025.
1. What Fleet-wide Emissions Levels Correspond to the CO2
Standards?
EPA is proposing standards that are projected to require, on an
average industry fleet wide basis, 163 grams/mile of CO2 in
model year 2025. The level of 163 grams/mile CO2 would be
equivalent on a mpg basis to 54.5 mpg, if this level was achieved
solely through improvements in fuel efficiency.218 219 For
passenger cars, the proposed footprint curves call for reducing
CO2 by 5 percent per year on average from the model year
2016 passenger car standard through model year 2025. In recognition of
manufacturers' unique challenges in improving the GHG emissions of
full-size pickup trucks as we transition from the MY 2016 standards to
MY 2017 and later, while preserving the utility (e.g., towing and
payload capabilities) of those vehicles, EPA is proposing a lower
annual rate of improvement for light-duty trucks in the early years of
the program. For light-duty trucks, the footprint curves call for
reducing CO2 by 3.5 percent per year on average from the
model year 2016 truck standard through model year 2021. EPA is also
proposing to change the slopes of the CO2-footprint curves
for light-duty trucks from those in the 2012-2016 rule, in a manner
that effectively means that the annual rate of improvement for smaller
light-duty trucks in model years 2017 through 2021 would be higher than
3.5 percent, and the annual rate of improvement for larger light-duty
trucks over the same time period would be lower than 3.5 percent to
account for the unique challenges for improving the GHG of large light
trucks while maintaining cargo hauling and towing utility. For model
years 2022 through 2025, EPA is proposing a reduction of CO2
for light-
[[Page 74977]]
duty trucks of 5 percent per year on average starting from the model
year 2021 truck standard.
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\218\ In comparison, the MY 2016 CO2 standard is
projected to achieve a national fleet-wide average, covering both
cars and trucks, of 250 g/mile.
\219\ Real-world CO2 is typically 25 percent higher
and real-world fuel economy is typically 20 percent lower than the
CO2 and CAFE values discussed here. The reference to
CO2 here refers to CO2 equivalent reductions,
as this level includes some reductions in emissions of greenhouse
gases other than CO2, from refrigerant leakage, as one
part of the AC related reductions.
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EPA's proposed standards include EPA's projection of average
industry wide CO2-equivalent emission reductions from A/C
improvements, where the proposed footprint curve is made more stringent
by an amount equivalent to this projection of A/C credits. This
projection of A/C credits builds on the projections from MYs 2012-2016,
with the increases in credits mainly due to the full penetration of low
GWP alternative refrigerant by MY 2021. The proposed car standards
would begin with MY 2017, with a generally linear increase in
stringency from MY 2017 through MY 2025 for cars. The truck standards
have a more gradual increase for MYs 2017-2020 then more rapidly in MY
2021. For MYs 2021-2025, the truck standards increase in stringency
generally in a linear fashion. EPA proposes to continue to have
separate standards for cars and light trucks, and to have identical
definitions of cars and trucks as NHTSA, in order to harmonize with
CAFE standards. The tables in this section below provide overall fleet
average levels that are projected for both cars and light trucks over
the phase-in period which is estimated to correspond with the proposed
standards. The actual fleet-wide average g/mi level that would be
achieved in any year for cars and trucks will depend on the actual
production for that year, as well as the use of the various credit and
averaging, banking, and trading provisions. For example, in any year,
manufacturers would be able to generate credits from cars and use them
for compliance with the truck standard, or vice versa. Such transfer of
credits between cars and trucks is not reflected in the table below. In
Section III.F, EPA discusses the year-by-year estimate of emissions
reductions that are projected to be achieved by the standards.
In general, the proposed schedule of standards acts as a phase-in
to the MY 2025 standards, and reflects consideration of the appropriate
lead-time and engineering redesign cycles for each manufacturer to
implement the requisite emission reductions technology across its
product line. Note that MY 2025 is the final model year in which the
standards become more stringent. The MY 2025 CO2 standards
would remain in place for MY 2025 and later model years, until revised
by EPA in a future rulemaking. EPA estimates that, on a combined fleet-
wide national basis, the 2025 MY proposed standards would require a
level of 163 g/mile CO2. The derivation of the 163 g/mile
estimate is described in Section III.B.2. EPA has estimated the overall
fleet-wide CO2-equivalent emission (target) levels that
correspond with the proposed attribute-based standards, based on the
projections of the composition of each manufacturer's fleet in each
year of the program. Tables Table III-9 and Table III-10 provide these
target estimates for each manufacturer.
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These estimates were aggregated based on projected production
volumes into the fleet-wide averages for cars, trucks, and the entire
fleet, shown in Table III-11.\220\ The combined fleet estimates are
based on the assumption of a fleet mix of cars and trucks that vary
over the MY 2017-2025 timeframe. This fleet mix distribution can be
found in Chapter 1 of the join TSD.
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\220\ Due to rounding during calculations, the estimated fleet-
wide CO2-equivalent levels may vary by plus or minus 1
gram.
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As shown in Table III-11, fleet-wide CO2-equivalent
emission levels for cars under the approach are projected to decrease
from 213 to 144 grams per mile between MY 2017 and MY 2025. Similarly,
fleet-wide CO2-equivalent emission levels for trucks are
projected to decrease from 295 to 203 grams per mile. These numbers do
not include the effects of other flexibilities and credits in the
program.\221\ The estimated achieved values can be found in Chapter 3
of the Regulatory Impact Analysis (RIA).
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\221\ Nor do they reflect ABT.
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As noted above, EPA is proposing standards that would result in
increasingly stringent levels of CO2 control from MY 2017
though MY 2025. Applying the CO2 footprint curves applicable
in each model year to the vehicles (and their footprint distributions)
expected to be sold in each model year produces progressively more
stringent estimates of fleet-wide CO2 emission targets. The
standards achieve important CO2 emissions reductions through
the application of feasible control technology at reasonable cost,
considering the needed lead time for this program and with proper
consideration of manufacturer product redesign cycles. EPA has analyzed
the feasibility of achieving the proposed CO2 standards,
based on projections of the adoption of technology to reduce emissions
of CO2, during the normal redesign process for cars and
trucks, taking into account the effectiveness and cost of the
technology. The results of the analysis are discussed in detail in
Section III.D below and in the draft RIA. EPA also presents the overall
estimated costs and benefits of the car and truck proposed
CO2 standards in Section III.H. In developing the proposal,
EPA has evaluated the kinds of technologies that could be utilized by
the automobile industry, as well as the associated costs for the
industry and fuel savings for the consumer, the magnitude of the GHG
and oil reductions that may be achieved, and other factors relevant
under the CAA.
With respect to the lead time and cost of incorporating technology
improvements that reduce GHG emissions, EPA places important weight on
the fact that the proposed rule provides a long planning horizon to
achieve the very challenging emissions standards being proposed, and
provides manufacturers with certainty when planning future products.
The time-frame and levels for the standards are expected to provide
manufacturers the time needed to develop and incorporate technology
that will achieve GHG reductions, and to do this as part of the normal
vehicle redesign process. Further discussing of lead time, redesigns
and feasibility can be found in Section III-D and Chapter 3 of the
joint TSD.
In the MY 2012-2016 Final Rule, EPA established several provisions
which will continue to apply for the proposed MY2017-2025 standards.
Consistent with the requirement of CAA section 202(a)(1) that standards
be applicable to vehicles ``for their useful life,'' CO2
vehicle standards would apply for the useful life of the vehicle. Under
section 202(i) of the Act, which authorized the Tier 2 standards, EPA
established a useful life period of 10 years or 120,000
[[Page 74982]]
miles, whichever first occurs, for all light-duty vehicles and light-
duty trucks.\222\ This useful life was applied to the MY 2012-2016 GHG
standards and EPA is not proposing any changes to the useful life for
MYs 2017-2025. Also, as with MYs 2012-2016, EPA proposes that the in-
use emission standard would be 10% higher for a model than the emission
levels used for certification and compliance with the fleet average
that is based on the footprint curves. As with the MY2012-2016
standards, this will address issues of production variability and test-
to-test variability. The in-use standard is discussed in Section III.E.
Finally, EPA is not proposing any changes to the test procedures over
which emissions are measured and weighted to determine compliance with
the standards. These procedures are the Federal Test Procedure (FTP or
``city'' test) and the Highway Fuel Economy Test (HFET or ``highway''
test).
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\222\ See 65 FR 6698 (February 10, 2000).
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2. What Are the Proposed CO2 Attribute-based Standards?
As with the MY 2012-2016 standards, EPA is proposing separate car
and truck standards, that is, vehicles defined as cars have one set of
footprint-based curves for MY 2017-2025 and vehicles defined as trucks
have a different set for MY 2017-2025. In general, for a given
footprint the CO2 g/mi target for trucks would be less
stringent than for a car with the same footprint. EPA's approach for
establishing the footprint curves for model years 2017 and later,
including changes from the approach used for the MY2012-2016 footprint
curves, is discussed in Section II.C and Chapter 2 of the joint TSD.
The curves are described mathematically by a family of piecewise linear
functions (with respect to vehicle footprint) that gradually and
continually ramp down from the MY 2016 curve established in the
previous rule. As Section II.C describes, EPA has modified the curves
from 2016, particularly for trucks. To make this modification, we
wanted to ensure that starting from the 2016 curve, there is a gradual
transition to the new slopes and cut point (out to 74 sq ft from 66 sq
ft). The transition is also designed to prevent the curve from one year
from crossing the previous year's curve.
Written in mathematic notation, the form of the proposed function
is as follows: \223\
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\223\ See proposed Regulatory text, which are the official
coefficients and equation. The information proposed here is a
summary version.
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The car curves are largely similar to 2016 curve in slope. By
contrast, the MY 2017 and later truck curves are steeper relative to
the MY 2016 curve, but gradually flatten as a result of the
multiplicative increase of the standards. As a further change from the
MYs 2012-2016 rule, the truck curve does not reach the ultimate
cutpoint of 74 sq ft until 2022. The gap between the 2020 curve and the
2021 curve is indicative of design of the truck standards described
earlier, where a significant proportion of the increased stringency
over the first five years occurs between MY 2020 and MY 2021. Finally,
the gradual flattening of both the car and the trucks curves is
noticeable. For further discussion of these topics, please see Section
II.C and Chapter 2 of the joint TSD.
[[Page 74986]]
3. Mid-Term Evaluation
Given the long time frame at issue in setting standards for MY2022-
2025 light-duty vehicles, and given NHTSA's obligation to conduct a
separate rulemaking in order to establish final standards for vehicles
for those model years, EPA and NHTSA will conduct a comprehensive mid-
term evaluation and agency decision-making as described below. Up to
date information will be developed and compiled for the evaluation,
through a collaborative, robust and transparent process, including
public notice and comment. The evaluation will be based on (1) A
holistic assessment of all of the factors considered by the agencies in
setting standards, including those set forth in the rule and other
relevant factors, and (2) the expected impact of those factors on the
manufacturers' ability to comply, without placing decisive weight on
any particular factor or projection. The comprehensive evaluation
process will lead to final agency action by both agencies.
Consistent with the agencies' commitment to maintaining a single
national framework for regulation of vehicle emissions and fuel
economy, the agencies fully expect to conduct the mid-term evaluation
in close coordination with the California Air Resources Board (CARB).
Moreover, the agencies fully expect that any adjustments to the
standards will be made with the participation of CARB and in a manner
that ensures continued harmonization of state and Federal vehicle
standards.
EPA will conduct a mid-term evaluation of the later model year
light-duty GHG standards (MY2022-2025). The evaluation will determine
whether those standards are appropriate under section 202(a) of the
Act. Under the regulations proposed today, EPA would be legally bound
to make a final decision, by April 1, 2018, on whether the MY 2022-2025
GHG standards are appropriate under section 202(a), in light of the
record then before the agency.
EPA, NHTSA and CARB will jointly prepare a draft Technical
Assessment Report (TAR) to inform EPA's determination on the
appropriateness of the GHG standards and to inform NHTSA's rulemaking
for the CAFE standards for MYs 2022-2025. The TAR will examine the same
issues and underlying analyses and projections considered in the
original rulemaking, including technical and other analyses and
projections relevant to each agency's authority to set standards as
well as any relevant new issues that may present themselves. There will
be an opportunity for public comment on the draft TAR, and appropriate
peer review will be performed of underlying analyses in the TAR. The
assumptions and modeling underlying the TAR will be available to the
public, to the extent consistent with law.
EPA will also seek public comment on whether the standards are
appropriate under section 202(a), e.g. comments to affirm or change the
GHG standards (either more or less stringent). The agencies will
carefully consider comments and information received and respond to
comments in their respective subsequent final actions.
EPA and NHTSA will consult and coordinate in developing EPA's
determination on whether the MY 2022-2025 GHG standards are appropriate
under section 202(a) and NHTSA's NPRM.
In making its determination, EPA will evaluate and determine
whether the MY2022-2025 GHG standards are appropriate under section
202(a) of the CAA based on a comprehensive, integrated assessment of
all of the results of the review, as well as any public comments
received during the evaluation, taken as a whole. The decision making
required of the Administrator in making that determination is intended
to be as robust and comprehensive as that in the original setting of
the MY2017-2025 standards.
In making this determination, EPA will consider information on a
range of relevant factors, including but not limited to those listed in
the proposed rule and below:
1. Development of powertrain improvements to gasoline and diesel
powered vehicles.
2. Impacts on employment, including the auto sector.
3. Availability and implementation of methods to reduce weight,
including any impacts on safety.
4. Actual and projected availability of public and private charging
infrastructure for electric vehicles, and fueling infrastructure for
alternative fueled vehicles.
5. Costs, availability, and consumer acceptance of technologies to
ensure compliance with the standards, such as vehicle batteries and
power electronics, mass reduction, and anticipated trends in these
costs.
6. Payback periods for any incremental vehicle costs associated
with meeting the standards.
7. Costs for gasoline, diesel fuel, and alternative fuels.
8. Total light-duty vehicle sales and projected fleet mix.
9. Market penetration across the fleet of fuel efficient
technologies.
10. Any other factors that may be deemed relevant to the review.
If, based on the evaluation, EPA decides that the GHG standards are
appropriate under section 202(a), then EPA will announce that final
decision and the basis for EPA's decision. The decision will be final
agency action which also will be subject to judicial review on its
merits. EPA will develop an administrative record for that review that
will be no less robust than that developed for the initial
determination to establish the standards. In the midterm evaluation,
EPA will develop a robust record for judicial review that is the same
kind of record that would be developed and before a court for judicial
review of the adoption of standards.
Where EPA decides that the standards are not appropriate, EPA will
initiate a rulemaking to adopt standards that are appropriate under
section 202(a), which could result in standards that are either less or
more stringent. In this rulemaking EPA will evaluate a range of
alternative standards that are potentially effective and reasonably
feasible, and the Administrator will propose the alternative that in
her judgment is the best choice for a standard that is appropriate
under section 202(a).\224\ If EPA initiates a rulemaking, it will be a
joint rulemaking with NHTSA. Any final action taken by EPA at the end
of that rulemaking is also judicially reviewable.
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\224\ The provisions of CAA section 202(b)(1)(C) are not
applicable to any revisions of the greenhouse standards adopted in a
later rulemaking based on the mid-term evaluation. Section
202(b)(1)(C) refers to EPA's authority to revise ``any standard
prescribed or previously revised under this subsection,'' and
indicates that ``[a]ny revised standard'' shall require a reduction
of emissions from the standard that was previously applicable. These
provisions apply to standards that are adopted under subsection
202(b) of the Act and are later revised. These provisions are
limited by their terms to such standards, and do not otherwise limit
EPA's general authority under section 202(a) to adopt standards and
revise them ``from time to time.'' Since the greenhouse gas
standards are not adopted under subsection 202(b), section
202(b)(1)(C) does not apply to these standards or any subsequent
revision of these standards.
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The MY 2022-2025 GHG standards will remain in effect unless and
until EPA changes them by rulemaking.
NHTSA intends to issue conditional standards for MYs 2022-2025 in
the LDV rulemaking being initiated this fall for MY2017 and later model
years. The CAFE standards for MYs 2022-2025 will be determined with
finality in a subsequent, de novo notice and comment rulemaking
conducted in full compliance with section 32902 of title 49 U.S.C. and
other applicable law.
[[Page 74987]]
Accordingly, NHTSA's development of its proposal in that later
rulemaking will include the making of economic and technology analyses
and estimates that are appropriate for those model years and based on
then-current information.
Any rulemaking conducted jointly by the agencies or by NHTSA alone
will be timed to provide sufficient lead time for industry to make
whatever changes to their products that the rulemaking analysis deems
feasible based on the new information available. At the very latest,
the three agencies will complete the mid-term evaluation process and
subsequent rulemaking on the standards that may occur in sufficient
time to promulgate final standards for MYs 2022-2025 with at least 18
months lead time, but additional lead time may be provided.
EPA understands that California intends to propose a mid-term
evaluation in its program that is coordinated with EPA and NHTSA and is
based on a similar set of factors as outlined in this Appendix A. The
rules submitted to EPA for a waiver under the CAA will include such a
mid-term evaluation. EPA understands that California intends to
continue promoting harmonized state and federal vehicle standards. EPA
further understands that California's 2017-2025 standards to be
submitted to EPA for a waiver under the Clean Air Act will deem
compliance with EPA greenhouse gas emission standards, even if amended
after 2012, as compliant with California's. Therefore, if EPA revises
it standards in response to the mid-term evaluation, California may
need to amend one or more of its 2022-2025 MY standards and would
submit such amendments to EPA with a request for a waiver, or for
confirmation that said amendments fall within the scope of an existing
waiver, as appropriate.
4. Averaging, Banking, and Trading Provisions for CO2
Standards
In the MY 2012-2016 rule, EPA adopted credit provisions for credit
carry-back, credit carry-forward, credit transfers, and credit trading.
For EPA's purposes, these kinds of provisions are collectively termed
Averaging, Banking, and Trading (ABT), and have been an important part
of many mobile source programs under CAA Title II, both for fuels
programs as well as for engine and vehicle programs.\225\ As in the
MY2012-2016 program, EPA is proposing basically the same comprehensive
program for averaging, banking, and trading of credits which together
will help manufacturers in planning and implementing the orderly phase-
in of emissions control technology in their production, consistent with
their typical redesign schedules. ABT is important because it can help
to address many issues of technological feasibility and lead-time, as
well as considerations of cost. ABT is an integral part of the standard
setting itself, and is not just an add-on to help reduce costs. In many
cases, ABT resolves issues of cost or technical feasibility, allowing
EPA to set a standard that is numerically more stringent. The ABT
provisions are integral to the fleet averaging approach established in
the MY 2012-2016 rule. EPA is proposing to change the credit carry-
forward provisions as described below, but the program otherwise would
remain in place unchanged for model years 2017 and later.
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\225\ See 75 FR at 25412-413.
---------------------------------------------------------------------------
As noted above, the ABT provisions consist primarily of credit
carry-back, credit carry-forward, credit transfers, and credit trading.
A manufacturer may have a deficit at the end of a model year after
averaging across its fleet using credit transfers between cars and
trucks--that is, a manufacturer's fleet average level may fail to meet
the required fleet average standard. Credit carry-back refers to using
credits to offset any deficit in meeting the fleet average standards
that had accrued in a prior model year. A deficit must be offset within
3 model years using credit carry-back provisions. After satisfying any
needs to offset pre-existing debits within a vehicle category,
remaining credits may be banked, or saved for use in future years. This
is referred to as credit carry-forward. The EPCA/EISA statutory
framework for the CAFE program includes a 5-year credit carry-forward
provision and a 3-year credit carry-back provision. In the MYs 2012-
2016 program, EPA chose to adopt 5-year credit carry-forward and 3-year
credit carry-back provisions as a reasonable approach that maintained
consistency between the agencies' provisions. EPA is proposing to
continue with this approach in this rulemaking. (A further discussion
of the ABT provisions can be found at 75 FR 25412-14 May 7, 2010).
Although the credit carry-forward and carry-back provisions would
generally remain in place for MY 2017 and later, EPA is proposing to
allow all unused credits generated in MY 2010-2016 to be carried
forward through MY 2021. This amounts to the normal 5 year carry-
forward for MY 2016 and later credits but provides additional carry-
forward years for credits earned in MYs 2010-2015. Extending the life
for MY 2010-2015 credits would provide greater flexibility for
manufacturers in using the credits they have generated. These credits
would help manufacturers resolve lead-time issues they might face in
the model years prior to 2021 as they transition from the 2016
standards to the progressively more stringent standards for 2017 and
later. It also provides an additional incentive to generate credits
earlier, for example in MYs 2014 and 2015, because those credits may be
used through 2021, thereby encouraging the earlier use of additional
CO2 reducing technology.
While this provision provides greater flexibility in how
manufacturers use credits they have generated, it would not change the
overall CO2 benefits of the National Program, as EPA does
not expect that any of the credits would have expired as they likely
would be used or traded to other manufacturers. EPA believes the
proposed approach provides important additional flexibility in the
early years of the new MY2017 and later standards. EPA requests
comments on the proposed approach for carrying over MY 2010-2015
credits through MY 2021.
EPA is not proposing to allow MY 2009 early credits to be carried
forward beyond the normal 5 years due to concerns expressed during the
2012-2016 rulemaking that there may be the potential for large numbers
of credits that could be generated in MY 2009 for companies that are
over-achieving on CAFE and that some of these credits could represent
windfall credits.\226\ In response to these concerns, EPA placed
restrictions the use of MY 2009 credits (for example, MY 2009 credits
may not be traded) and does not believe expanding the use of MY 2009
credits would be appropriate. Under the MY 2012-2016 early credits
program, manufacturers have until the end of MY 2011 (reports must be
submitted by April 2012), when the early credits program ends, to
submit early credit reports. Therefore, EPA does not yet have
information on the amount of early MY2009 credits actually generated by
manufacturers to assess whether or not they could be viewed as
windfall. Nevertheless, because these concerns continue, EPA is
proposing not to extend the MY 2009 credit transfers past the existing
5-years limit.
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\226\ 75 FR at 25442. Moreover, as pointed out in the earlier
rulemaking, there can be no legitimate expectation that these 2009
MY credits could be used as part of a compliance strategy in model
years after 2014, and thus no reason to carry forward the credits
past 5 years due to action in reliance by manufacturers.
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Transferring credits refers to exchanging credits between the two
averaging sets, passenger cars and trucks, within a manufacturer. For
[[Page 74988]]
example, credits accrued by over-compliance with a manufacturer's car
fleet average standard could be used to offset debits accrued due to
that manufacturer not meeting the truck fleet average standard in a
given year. Finally, accumulated credits may be traded to another
manufacturer. In EPA's CO2 program, there are no limits on
the amount of credits that may be transferred or traded.
The averaging, banking, and trading provisions are generally
consistent with those included in the CAFE program, with a few notable
exceptions. As with EPA's approach (except for the proposal discussed
above for a one-time extended carry-forward of MY2010-2016 credits),
CAFE allows five year carry-forward of credits and three year carry-
back, per EISA. CAFE transfers of credits across a manufacturer's car
and truck averaging sets are also allowed, but with limits established
by EISA on the use of transferred credits. The amount of transferred
credits that can be used in a year is limited under CAFE, and
transferred credits may not be used to meet the CAFE minimum domestic
passenger car standard, also per statute. CAFE allows credit trading,
but again, traded credits cannot be used to meet the minimum domestic
passenger car standard.
5. Small Volume Manufacturer Standards
In adopting the CO2 standards for MY 2012-2016, EPA
recognized that for very small volume manufacturers, the CO2
standards adopted for MY 2012-2016 would be extremely challenging and
potentially infeasible absent credits from other manufacturers. EPA
therefore deferred small volume manufacturers (SVMs) with annual U.S.
sales less than 5,000 vehicles from having to meet CO2
standards until EPA is able to establish appropriate SVM standards. As
part of establishing eligibility for the exemption, manufacturers must
make a good faith effort to secure credits from other manufacturers, if
they are reasonably available, to cover the emissions reductions they
would have otherwise had to achieve under applicable standards.
These small volume manufacturers face a greater challenge in
meeting CO2 standards compared to large manufacturers
because they only produce a few vehicle models, mostly focusing on high
performance sports cars and luxury vehicles. These manufacturers have
limited product lines across which to average emissions, and the few
models they produce often have very high CO2 levels. As SVMs
noted in discussions, SVMs only produce one or two vehicle types but
must compete directly with brands that are part of larger manufacturer
groups that have more resources available to them. There is often a
time lag in the availability of technologies from suppliers between
when the technology is supplied to large manufacturers and when it is
available to small volume manufacturers. Also, incorporating new
technologies into vehicle designs costs the same or more for small
volume manufacturers, yet the costs are spread over significantly
smaller volumes. Therefore, SVMs typically have longer model life
cycles in order to recover their investments. SVMs further noted that
despite constraints facing them, SVMs need to innovate in order to
differentiate themselves in the market and often lead in incorporating
technological innovations, particularly lightweight materials.
In the MY 2012-2016 Final Rule, EPA noted that it intended to
conduct a follow-on rulemaking to establish appropriate standards for
these manufacturers. In developing this proposal, the agencies held
detailed technical discussions with the manufacturers eligible for the
exemption under the MY 2012-2016 program and reviewed detailed product
plans of each manufacturer. EPA continues to believe that SVMs would
face great difficulty meeting the primary CO2 standards and
that establishing challenging but less stringent SVM standards is
appropriate given the limited products offering of SVMs. EPA believes
it is important to establish standards that will require SVMs to
continue to innovate to reduce emissions and do their ``fair share''
under the GHG program. However, selecting a single set of standards
that would apply to all SVMs is difficult because each manufacturer's
product lines vary significantly. EPA is concerned that a standard that
would be appropriate for one manufacturer may not be feasible for
another, potentially driving them from the domestic market.
Alternatively, a less stringent standard may only cap emissions for
some manufacturers, providing little incentive to reduce emissions.
Based on this, rather than conducting a separate rulemaking, as
part of this MY 2017-2025 rulemaking EPA is proposing to allow SVMs to
petition EPA for an alternative CO2 standard for these model
years. The proposed approach for SVM standards and eligibility
requirements are described below. EPA is also requesting comments on
extending eligibility for the proposed SVM standards to very small
manufacturers that are owned by large manufacturers but are able to
establish that they are operationally independent.
EPA considered a variety of approaches and believes a case-by-case
approach for establishing SVM standards would be appropriate. EPA is
proposing to allow eligible SVMs the option to petition EPA for
alternative standards. An SVM utilizing this option would be required
to submit data and information that the agency would use in addition to
other available information to establish CO2 standards for
that specific manufacturer. EPA requests comments on all aspects of the
proposed approach described in detail below.
a. Overview of Existing Case-by-Case Approaches
A case-by-case approach for establishing standards for SVMs has
been adopted by NHTSA for CAFE, CARB in their 2009-2016 GHG program,
and the European Union (EU) for European CO2 standards. For
the CAFE program, EPCA allows manufacturers making less than 10,000
vehicles per year worldwide to petition the agency to have an
alternative standard set for them.\227\ NHTSA has adopted alternative
standards for some small volume manufacturers under these CAFE
provisions and continually reviews applications as they are
submitted.\228\ Under the CAFE program, petitioners must include
projections of the most fuel efficient production mix of vehicle
configurations for a model year and a discussion demonstrating that the
projections are reasonable. Petitioners must include, among other
items, annual production data, efforts to comply with applicable fuel
economy standards, and detailed information on vehicle technologies and
specifications. The petitioner must explain why they have not pursued
additional means that would allow them to achieve higher average fuel
economy. NHTSA publishes a proposed decision in the Federal Register
and accepts public comments. Petitions may be granted for up to three
years.
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\227\ See 49 U.S.C. 32902(d) and 49 CFR Part 525. Under the CAFE
program, manufacturers who manufacture less than 10,000 passenger
cars worldwide annually may petition for an exemption from
generally-applicable CAFE standards, in which case NHTSA will
determine what level of CAFE would be maximum feasible for that
particular manufacturer if the agency determines that doing so is
appropriate.
\228\ Alternative CAFE standards are provided in 49 CFR 531.5
(e).
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For the California GHG standards for MYs 2009-2016, CARB
established a process that would start at the beginning of MY2013,
where small volume manufacturers would identify all MY
[[Page 74989]]
2012 vehicle models certified by large volume manufacturers that are
comparable to the SVM's planned MY 2016 vehicle models.\229\ The
comparison vehicles were to be selected on the basis of horsepower and
power to weight ratio. The SVM was required to demonstrate the
appropriateness of the comparison models selected. CARB would then
provide a target CO2 value based on the emissions
performance of the comparison vehicles to the SVM for each of their
vehicle models to be used to calculate a fleet average standard for
each test group for MY2016 and later. Since CARB provides that
compliance with the National Program for MYs 2012-2016 will be deemed
compliance with the CARB program, it has not taken action to set unique
SVM standards, but its program nevertheless was a useful model to
consider.
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\229\ 13 CCR 1961.1(D).
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The EU process allows small manufacturers to apply for a derogation
from the primary CO2 emissions reduction targets.\230\
Applications for 2012 were required to be submitted by manufacturers no
later than March 31, 2011, and the Commission will assess the
application within 9 months of the receipt of a complete application.
Applications for derogations for 2012 have been submitted by several
manufacturers and non confidential versions are currently available to
the public.\231\ In the EU process, the SVM proposes an alternative
emissions target supported by detailed information on the applicant's
economic activities and technological potential to reduce
CO2 emissions. The application also requires information on
individual vehicle models such as mass and specific CO2
emissions of the vehicles, and information on the characteristics of
the market for the types of vehicles manufactured. The proposed
alternative emissions standards may be the same numeric standard for
multiple years or a declining standard, and the alternative standards
may be established for a maximum period of five years. Where the
European Commission is satisfied that the specific emissions target
proposed by the manufacturer is consistent with its reduction
potential, including the economic and technological potential to reduce
its specific emissions of CO2, and taking into account the
characteristics of the market for the type of car manufactured, the
Commission will grant a derogation to the manufacturer.
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\230\ Article 11 of Regulation (EC) No 443/2009 and EU No 63/
2011. See also ``Frequently asked questions on application for
derogation pursuant to Aticle 11 of Regulation (EC) 443/2009.''
\231\ http://ec.europa.eu/clima/documentation/transport/vehicles/cars_en.htm.
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b. EPA's Proposed Framework for Case-by-Case SVM Standards
EPA proposes that SVMs will become subject to the GHG program
beginning with MY 2017. Starting in MY 2017, an SVM would be required
to meet the primary program standards unless EPA establishes
alternative standards for the manufacturer. EPA proposes that eligible
manufacturers seeking alternative standards must petition EPA for
alternative standards by July 30, 2013, providing the information
described below. If EPA finds that the application is incomplete, EPA
would notify the manufacturer and provide an additional 30 days for the
manufacturer to provide all necessary information. EPA would then
publish a notice in the Federal Register of the manufacturer's petition
and recommendations for an alternative standard, as well as EPA's
proposed alternative standard. Non confidential business information
portions of the petition would be available to the public for review in
the docket. After a period for public comment, EPA would make a
determination on an alternative standard for the manufacturer and
publish final notice of the determination in the Federal Register for
the general public as well as the applicant. EPA expects the process to
establish the alternative standard to take about 12 months once a
complete application is submitted by the manufacturer.
EPA proposes that manufacturers would petition for alternative
standards for up to 5 model years (i.e., MYs 2017--2021) as long as
sufficient information is available on which to base the alternative
standards (see application discussion below). This initial round of
establishing case-by-case standards would be followed by one or more
additional rounds until standards are established for the SVM for all
model years up to and including MY 2025. For the later round(s) of
standard setting, EPA proposes that the SVM must submit their petition
36 months prior to the start of the first model year for which the
standards would apply in order to provide sufficient time for EPA to
evaluate and set alternative standards (e.g., January 1, 2018 for MY
2022). The 36 month requirement would not apply to new market entrants,
discussed in section III.C.5.e below. The subsequent case-by-case
standard setting would follow the same notice and comment process as
outlined above.
EPA also proposes that if EPA does not establish SVM standards for
a manufacturer at least 12 months prior to the start of the model year
in cases where the manufacturer provided all required information by
the established deadline, the manufacturer may request an extension of
the alternative standards currently in place, on a model year by model
year basis. This would provide assurance to manufacturers that they
would have at least 12 months lead time to prepare for the upcoming
model year.
EPA requests comments on allowing SVMs to comply early with the MY
2017 SVM standards established for them. Manufacturers may want to
certify to the MY 2017 standards in earlier model years (e.g., MY 2015
or MY 2016). Under the MY 2012-2016 program, SVMs are eligible for an
exemption from the standards as long as they have made a good faith
effort to purchase credits. By certifying to the SVM alternative
standard early in lieu of this exemption, manufacturers could avoid
having to seek out credits to purchase in order to maintain this
exemption. EPA would not allow certification for vehicles already
produced by the manufacturer, so the applicability of this provision
would be limited due to the timing of establishing the SVM standards.
Manufacturers interested in the possibility of early compliance would
be able to apply for SVM standards earlier than the required July 30,
2013 deadline proposed above. An early compliance option also may be
beneficial for new manufacturers entering the market that qualify as
SVMs.
c. Petition Data and Information Requirements
As described in detail in section I.D.2, EPA establishes motor
vehicle standards under section 202(a) that are based on technological
feasibility, and considering lead time, safety, costs and other impacts
on consumers, and other factors such as energy impacts associated with
use of the technology. EPA proposes to require that SVMs submit the
data and information listed below which EPA would use, in addition to
other relevant information, in determining an appropriate alternative
standard for the SVM. EPA would also consider data and information
provided by commenters during the comment process in determining the
final level of the SVM's standards. As noted above, other case-by-case
standard setting approaches have been adopted by NHTSA, the European
Union, and CARB and EPA has considered the data requirements of those
programs in developing the proposed data and information requirements
detailed below. EPA
[[Page 74990]]
requests comments on the following proposed data requirements.
EPA proposes that SVMs would provide the following information as
part of their petition for SVM standards:
Vehicle Model and Fleet Information
MYs that the application covers--up to 5 MYs. Sufficient
information must be provided to establish alternative standards for
each year
Vehicle models and sales projections by model for each MY
Description of models (vehicle type, mass, power,
footprint, expected pricing)
Description of powertrain
Production cycle for each model including new vehicle
model introductions
Vehicle footprint based targets and projected fleet
average standard under primary program by model year
Technology Evaluation
CO2 reduction technologies employed or expected
to be on the vehicle model(s) for the applicable model years, including
effectiveness and cost information
--Including A/C and potential off-cycle technologies
Evaluation of similar vehicles to those produced by the
petitioning SVM and certified in MYs 2012-2013 (or latest 2 MYs for
later applications) for each vehicle model including CO2
results and any A/C credits generated by the models
--Similar vehicles must be selected based on vehicle type, horsepower,
mass, power-to-weight, vehicle footprint, vehicle price range and other
relevant factors as explained by the SVM
Discussion of CO2 reducing technologies
employed on vehicles offered by the manufacturer outside of the U.S.
market but not in the U.S., including why those vehicles/technologies
are not being introduced in the U.S. market as a way of reducing
overall fleet CO2 levels
Evaluation of technologies projected by EPA as
technologies likely to be used to meet the MYs 2012-2016 and MYs 2017-
2025 standards that are not projected to be fully utilized by the
petitioning SVM and explanation of reasons for not using the
technologies, including relevant cost information \232\
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\232\ See 75 FR 25444 (Section III.D) for MY 2012-2016
technologies and Section III.D below for discussion of projected MY
2017-2025 technologies.
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SVM Projected Standards
The most stringent CO2 level estimated by the
SVM to be feasible and appropriate by model and MY and the
technological and other basis for the estimate
For each MY, projection of the lowest fleet average
CO2 production mix of vehicle models and discussion
demonstrating that these projections are reasonable
A copy of any applications submitted to NHTSA for MY 2012
and later alternative standards
Eligibility
U.S. sales for previous three model years and projections
for production volumes over the time period covered by the application
Complete information on ownership structure in cases where
SVM has ties to other manufacturers with U.S. vehicle sales
EPA proposes to weigh several factors in determining what
CO2 standards are appropriate for a given SVMs fleet. These
factors would include the level of technology applied to date by the
manufacturer, the manufacturer's projections for the application of
additional technology, CO2 reducing technologies being
employed by other manufacturers including on vehicles with which the
SVM competes directly and the CO2 levels of those vehicles,
and the technological feasibility and reasonableness of employing
additional technology not projected by the manufacturer in the time-
frame for which standards are being established. EPA would also
consider opportunities to generate A/C and off-cycle credits that are
available to the manufacturer. Lead time would be a key consideration
both for the initial years of the SVM standard, where lead time would
be shorter due to the timing of the notice and comment process to
establish the standards, and for the later years where manufacturers
would have more time to achieve additional CO2 reductions.
d. SVM Credits Provisions
As discussed in Section III.B.4, EPA's program includes a variety
of credit averaging, banking, and trading provisions. EPA proposes that
these provisions would generally apply to SVM standards as well, with
the exception that SVMs would not be allowed to trade credits to other
manufacturers. Because SVMs would be meeting alternative, less
stringent standards compared to manufacturers in the primary program,
EPA proposes that SVM would not be allowed to trade (i.e., sell or
otherwise provide) CO2 credits that the SVM generates
against the SVM standards to other manufacturers. SVMs would be able to
use credits purchased from other manufacturers generated in the primary
program. Although EPA does not expect significant credits to be
generated by SVMs due to the manufacturer-specific standard setting
approach being proposed, SVMs would be able to generate and use credits
internally, under the credit carry-forward and carry-back provisions.
Under a case-by-case approach, EPA would not view such credits as
windfall credits and not allowing internal banking could stifle
potential innovative approaches for SVMs. SVMs would also be able to
transfer credits between the car and light trucks categories.
e. SVM Standards Eligibility
i. Current SVMs
The MY 2012-2016 rulemaking limited eligibility for the SVM
deferment to manufacturers in the U.S. market in MY 2008 or MY 2009
with U.S. sales of less than 5,000 vehicles per year. After initial
eligibility has been established, the SVM remains eligible for the
exemption if the rolling average of three consecutive model years of
sales remains below 5,000 vehicles. Manufacturers going over the 5,000
vehicle rolling average limit would have two additional model years to
transition to having to meet applicable CO2 standards. Based
on these eligibility criteria, there are three companies that qualify
currently as SVMs under the MY2012-2016 standards: Aston Martin, Lotus,
and McLaren.\233\ These manufacturers make up much less than one
percent of total U.S. vehicles sales, so the environmental impact of
these alternative standards would be very small. EPA continues to
believe that the 5,000 vehicle cut-point and rolling three year average
approach is appropriate and proposes to retain it as a primary
criterion for SVMs to remain eligible for SVM standards. The 5,000
vehicle threshold allows for some sales growth by SVMs, as the SVMs in
the market today typically have annual sales of below 2,000 vehicles.
However, EPA wants to ensure that standards for as few vehicles as
possible are included in the SVM standards to minimize the
environmental impact, and therefore believes it is appropriate that
manufacturers with U.S. sales growing to above 5,000 vehicles per year
be required to comply with the primary standards. Manufacturers with
unusually strong sales in a given year would still likely remain
eligible, based on the three year rolling average. However, if a
manufacturer expands in
[[Page 74991]]
the U.S. market on a permanent basis such that they consistently sell
more than 5,000 vehicles per year, they would likely increase their
rolling average to above 5,000 and no longer be eligible. EPA believes
a manufacturer will be able to consider these provisions, along with
other factors, in its planning to significantly expand in the U.S.
market. As discussed below, EPA is not proposing to continue to tie
eligibility to having been in the market in MY 2008 or MY 2009, or any
other year and is instead proposing eligibility criteria for new SVMs
newly entering the U.S. market.
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\233\ Under the MY 2012-2016 program, manufacturers must also
make a good faith effort to purchase CO2 credits in order
to maintain eligibility for SVM status.
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ii. New SVMs (New Entrants to the U.S. Market)
As noted above, the SVM deferment under the MY 2012-2016 program
included a requirement that a manufacturer had to have been in the U.S.
vehicle market in MY 2008 or MY 2009. This provision ensured that a
known universe of manufacturers would be eligible for the exemption in
the short term and manufacturers would not be driven from the market as
EPA proceeded to develop appropriate SVM standards. EPA is not
proposing to include such a provision for the SVM standards eligibility
criteria for MY 2017-2025. EPA believes that with SVM standards in
place, tying eligibility to being in the market in a prior year is no
longer necessary because SVMs will be required to achieve appropriate
levels of emissions control. Also, it could serve as a potential market
barrier to competition by hindering new SVMs from entering the U.S.
market.
For new market entrants, EPA proposes that a manufacturer seeking
an alternative standard for MY2017-2025 must apply and that standards
would be established through the process described above. The new SVM
would not be able to certify their vehicles until the standards are
established and therefore EPA would expect the manufacturer to submit
an application as early as possible but at least 30 months prior to
when they expect to begin producing vehicles in order to provide enough
time for EPA to evaluate standards and to follow the notice and comment
process to establish the standards and for certification. In addition
to the information and data described below, EPA proposes to require
new market entrants to provide evidence that the company intends to
enter the U.S. market within the time frame of the MY2017-2025 SVM
standards. Such evidence would include documentation of work underway
to establish a dealer network, appropriate financing and marketing
plans, and evidence the company is working to meet other federal
vehicle requirements such as other EPA emissions standards and NHTSA
vehicle safety standards. EPA is concerned about the administrative
burden that could be created for the agency by companies with no firm
plans to enter the U.S. market submitting applications in order to see
what standard might be established for them. This information, in
addition to a complete application with the information and data
outlined above, would provide evidence of the seriousness of the
applicant. As part of this review, EPA reserves the right to not
undertake its SVM standards development process for companies that do
not exhibit a serious and documented effort to enter the U.S. market.
EPA remains concerned about the potential for gaming by a
manufacturer that sells less than 5,000 vehicles in the first year, but
with plans for significantly larger sales volumes in the following
years. EPA believes that it would not be appropriate to establish SVM
standards for a new market entrant that plans a steep ramp-up in U.S.
vehicle sales. Therefore, EPA proposes that for new entrants, U.S.
vehicle sales must remain below 5,000 vehicles for the first three
years in the market. After the initial three years, the manufacturer
must maintain a three year rolling average below 5,000 vehicles (e.g.,
the rolling average of years 2, 3 and 4, must be below 5,000 vehicles).
If a new market entrant does not comply with these provisions for the
first five years in the market, vehicles sold above the 5,000 vehicle
threshold would be found not to be covered by the alternative
standards, and EPA expects the fleet average is therefore not in
compliance with the standards and would be subject to enforcement
action and also, the manufacturer would lose eligibility for the SVM
standards until it has reestablished three consecutive years of sales
below 5,000 vehicles.
By not tying the 5,000 vehicle eligibility criteria to a particular
model year, it would be possible for a manufacturer already in the
market to drop below the 5,000 vehicle threshold in a future year and
attempt to establish eligibility. EPA proposes to treat such
manufacturers as new entrants to the market for purposes of determining
eligibility for SVM standards. However, the requirements to demonstrate
that the manufacturer intends to enter the U.S. market obviously would
not be relevant in this case, and therefore would not apply.
iii. Aggregation Requirements and an Operational Independence Concept
In determining eligibility for the MY 2012-2016 exemption, sales
volumes must be aggregated across manufacturers according to the
provisions of 40 CFR 86.1838-01(b)(3), which requires the sales of
different firms to be aggregated in various situations, including where
one firm has a 10% or more equity ownership of another firm, or where a
third party has a 10% or more equity ownership of two or more firms.
These are the same aggregation requirements used in other EPA small
volume manufacturer provisions, such as those for other light-duty
emissions standards.\234\ EPA proposes to retain these aggregation
provisions as part of the eligibility criteria for the SVM standards
for MYs 2017-2025. Manufacturers also retain, no matter their size, the
option to meet the full set of GHG requirements on their own, and do
not necessarily need to demonstrate compliance as part of a corporate
parent company fleet. However, as discussed below, EPA is seeking
comments on allowing manufacturers that otherwise would not be eligible
for the SVM standards due to these aggregation provisions, to
demonstrate to the Administrator that they are ``operationally
independent'' based on the criteria described below. Under such a
concept, if the Administrator were to determine that a manufacturer was
operationally independent, that manufacturer would be eligible for SVM
standards.
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\234\ For other programs, the eligibility cut point for SVM
flexibility is 15,000 vehicles rather than 5,000 vehicles.
---------------------------------------------------------------------------
During the 2012-2016 rule comment period, EPA received comments
from Ferrari requesting that EPA allow a manufacturer to apply to EPA
to establish SVM status based on the independence of its research,
development, testing, design, and manufacturing from another firm that
has ownership interest in that manufacturer. Ferrari is majority owned
by Fiat and would be aggregated with other Fiat brands, including
Chrysler, Maserati, and Alfa Romeo, for purposes of determining
eligibility for SVM standards; therefore Ferrari does not meet the
eligibility criteria for SVM status. However, Ferrari believes that it
would qualify for such an ``operational independence'' concept, if such
an option were provided. In the MY 2012-2016 Final Rule, EPA noted that
it would further consider the issue of operational independence and
seek public comments on this concept (see 75 FR 25420). In this
proposal, EPA is
[[Page 74992]]
requesting comment on the concept of operational independence.
Specifically, we are seeking comment on expanding eligibility for the
SVM standards to manufacturers who would have U.S. annual sales of less
than 5,000 vehicles and based on a demonstration that they are
``operationally independent'' of other companies. Under such an
approach, EPA would be amending the limitation for SVM corporate
aggregation provisions such that a manufacturer that is more than 10
percent owned by a large manufacturer would be allowed to qualify for
SVM standards on the basis of its own sales, because it operates its
research, design, production, and manufacturing independently from the
parent company.
In seeking public comment on this concept of operational
independence, EPA particularly is interested in comments regarding the
degree to which this concept could unnecessarily open up the SVM
standards to several smaller manufacturers that are integrated into
large companies--smaller companies that may be capable of and planning
to meet the CO2 standards as part of the larger
manufacturer's fleet. EPA also seeks comment on the concern that
manufacturers could change their corporate structure to take advantage
of such provisions (that is, gaming). EPA is therefore requesting
comment on approaches, described below, to narrowly define the
operational independence criteria to ensure that qualifying companies
are truly independent and to avoid gaming to meet the criteria. EPA
also requests comments on the possible implications of this approach on
market competition, which we believe should be fully explored through
the public comment process. EPA acknowledges that regardless of the
criteria for operational independence, a small manufacturer under the
umbrella of a large manufacturer is fundamentally different from other
SVMs because the large manufacturer has several options under the GHG
program to bring the smaller subsidiary into compliance, including the
use of averaging or credit transfer provisions, purchasing credits from
another manufacturer, or providing technical and financial assistance
to the smaller subsidiary. Truly independent SVMs do not have the
potential access to these options, with the exception of buying credits
from another manufacturer. EPA requests comments on the need for and
appropriateness of allowing companies to apply for less stringent SVM
standards based on sales that are not aggregated with other companies
because of operational independence.
EPA is considering and requesting comments on the operational
independence criteria listed below. These criteria are meant to
establish that a company, though owned by another manufacturer, does
not benefit operationally or financially from this relationship, and
should therefore be considered independent for purposes of calculating
the sales volume for the SVM program. Manufacturers would need to
demonstrate compliance with all of these criteria in order to be found
to be operationally independent. By ``related manufacturers'' below,
EPA means all manufacturers that would be aggregated together under the
10 percent ownership provisions contained in EPA's current small volume
manufacturer definition (i.e., the parent company and all subsidiaries
where there is 10 percent or greater ownership).
EPA would need to determine, based on the information provided by
the manufacturer in its application, that the manufacturer currently
meets the following criteria and has met them for at least 24 months
preceding the application submittal:
1. No financial or other support of economic value was provided by
related manufacturers for purposes of design, parts procurement, R&D
and production facilities and operation. Any other transactions with
related manufacturers must be conducted under normal commercial
arrangements like those conducted with other parties. Any such
transactions shall be at competitive pricing rates to the manufacturer.
2. Maintains separate and independent research and development,
testing, and production facilities.
3. Does not use any vehicle powertrains or platforms developed or
produced by related manufacturers.
4. Patents are not held jointly with related manufacturers.
5. Maintains separate business administration, legal, purchasing,
sales, and marketing departments; maintains autonomous decision making
on commercial matters.
6. Overlap of Board of Directors is limited to 25 percent with no
sharing of top operational management, including president, chief
executive officer (CEO), chief financial officer (CFO), and chief
operating officer (COO), and provided that no individual overlapping
director or combination of overlapping directors exercises exclusive
management control over either or both companies.
7. Parts or components supply agreements between related companies
must be established through open market process and to the extent that
manufacturer sells parts/components to non-related auto manufacturers,
it does so through the open market at competitive pricing.
In addition to the criteria listed above, EPA also requests
comments on the following programmatic elements and framework. EPA
requests comments on requiring the manufacturer applying for
operational independence to provide an attest engagement from an
independent auditor verifying the accuracy of the information provided
in the application.\235\ EPA foresees possible difficulty verifying the
information in the application, especially if the company is located
overseas. The principal purpose of the attest engagement would be to
provide an independent review and verification of the information
provided. EPA also would require that the application be signed by the
company president or CEO. After EPA approval, the manufacturer would be
required to report within 60 days any material changes to the
information provided in the application. A manufacturer would lose
eligibility automatically after the material change occurs. However,
EPA would confirm that the manufacturer no longer meets one or more of
the criteria and thus is no longer considered operationally
independent, and would notify the manufacturer. EPA would provide two
model years lead time for the manufacturer to transition to the primary
program. For example, if the manufacturer lost eligibility sometime in
calendar year 2018 (based on when the material change occurs), the
manufacturer would need to meet primary program standards in MY 2021.
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\235\ EPA has required attest engagements as part of its
Reformulated Fuels program. See 40 CFR Sec. 80.1164 and Sec.
80.1464.
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In addition, EPA requests comments on whether or not a manufacturer
losing eligibility should be able to re-establish itself as
operationally independent in a future year and over what period of time
they would need to meet the criteria to again be eligible. EPA requests
comments on, for example, whether or not a manufacturer meeting the
criteria for three to five consecutive years should be allowed to again
be considered operationally independent.
6. Nitrous Oxide, Methane, and CO2-equivalent Approaches
a. Standards and Flexibility
For light-duty vehicles, as part of the MY 2012-2016 rulemaking,
EPA finalized standards for nitrous oxide (N2O) of 0.010 g/
mile and methane (CH4) of 0.030 g/mile for MY 2012 and
[[Page 74993]]
later vehicles. 75 FR at 25421-24. The light-duty vehicle standards for
N2O and CH4 were established to cap emissions,
where current levels are generally significantly below the cap. The cap
would prevent future emissions increases, and were generally not
expected to result in the application of new technologies or
significant costs for the manufacturers for current vehicle designs.
EPA also finalized an alternative CO2 equivalent standard
option, which manufacturers may choose to use in lieu of complying with
the N2O and CH4 cap standards. The
CO2-equivalent standard option allows manufacturers to fold
all 2-cycle weighted N2O and CH4 emissions, on a
CO2-equivalent basis, along with CO2 into their
CO2 emissions fleet average compliance level.\236\ The
applicable CO2 fleet average standard is not adjusted to
account for the addition of N2O and CH4. For
flexible fueled vehicles, the N2O and CH4
standards must be met on both fuels (e.g., both gasoline and E-85).
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\236\ The global warming potentials (GWP) used in this rule are
consistent with the 100-year time frame values in the 2007
Intergovernmental Panel on Climate Change (IPCC) Fourth Assessment
Report (AR4). At this time, the 100-year GWP values from the 1996
IPCC Second Assessment Report (SAR) are used in the official U.S.
greenhouse gas inventory submission to the United Nations Framework
Convention on Climate Change (per the reporting requirements under
that international convention, which were last updated in 2006) .
N2O has a 100-year GWP of 298 and CH4 has a
100-year GWP of 25 according to the 2007 IPCC AR4.
---------------------------------------------------------------------------
After the light-duty standards were finalized, manufacturers raised
concerns that for a few of the vehicle models in their existing fleet
they were having difficulty meeting the N2O and/or
CH4 standards, in the near-term. In such cases,
manufacturers would still have the option of complying using the
CO2 equivalent alternative. On a CO2 equivalent
basis, folding in all N2O and CH4 emissions could
add up to 3-4 g/mile to a manufacturer's overall fleet-average
CO2 emissions level because the alternative standard must be
used for the entire fleet, not just for the problem vehicles. The 3-4
g/mile assumes all emissions are actually at the level of the cap. See
75 FR at 74211. This could be especially challenging in the early years
of the program for manufacturers with little compliance margin because
there is very limited lead time to develop strategies to address these
additional emissions. Some manufacturers believe that the current
CO2-equivalent fleet-wide option ``penalizes'' them by
requiring them to fold in both CH4 and N2O
emissions for their entire fleet, even if they have difficulty meeting
the cap on only one vehicle model.
In response to these concerns, as part of the heavy-duty GHG
rulemaking, EPA requested comment on and finalized provisions allowing
manufacturers to use CO2 credits, on a CO2-
equivalent basis, to meet the light-duty N2O and
CH4 standards.\237\ Manufacturers have the option of using
CO2 credits to meet N2O and CH4
standards on a test group basis as needed for MYs 2012-2016. In their
public comments to the proposal in the heavy-duty package,
manufacturers urged EPA to extend this flexibility indefinitely, as
they believed this option was more advantageous than the
CO2-equivalent fleet wide option (discussed previously)
already provided in the light-duty program, because it allowed
manufacturers to address N2O and CH4 separately
and on a test group basis, rather than across their whole fleet.
Further, manufacturers believed that since this option is allowed under
the heavy-duty standards, allowing it indefinitely in the light-duty
program would make the light- and heavy-duty programs more consistent.
In the Final Rule for Heavy-Duty Vehicles, EPA noted that it would
consider this issue further in the context of new standards for MYs
2017-2025 in the planned future light-duty vehicle rulemaking. 76 FR at
57194.
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\237\ See 76 FR at 57193-94.
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EPA has further considered this issue and is proposing to allow the
additional option of using CO2 credits to meet the light-
duty vehicle N2O and CH4 standards to extend for
all model years beyond MY 2016. EPA understands manufacturer concerns
that if they use the CO2-equivalent option for meeting the
GHG standards, they would be penalized by having to incorporate all
N2O and CH4 emissions across their entire fleet
into their CO2-equivalent fleet emissions level
determination. EPA continues to believe that allowing CO2
credits to meet CH4 and N2O standards on a
CO2-equivalent basis is a reasonable approach to provide
additional flexibility without diminishing overall GHG emissions
reductions.
EPA is also requesting comments on establishing an adjustment to
the CO2-equivalent standard for manufacturers selecting the
CO2-equivalent option established in the MY 2012-2016
rulemaking. Manufacturers would continue to be required to fold in all
of their CH4 and N2O emissions, along with
CO2, into their CO2-equivalent levels. They would
then apply the agency-established adjustment factor to the
CO2-equivalent standard. For example, if the adjustment for
CH4 and N2O combined was 1 to 2 g/mile
CO2-equivalent (taking into account the GWP of
N2O and CH4), manufacturers would determine their
CO2 fleet emissions standard and add the 1 to 2 g/mile
adjustment factor to it to determine their CO2-equivalent
standard. The adjustment factor would slightly increase the amount of
allowed fleet average CO2-equivalent emissions for the
manufacturer's fleet. The purpose of this adjustment would be so
manufacturers do not have to offset the typical N2O and
CH4 vehicle emissions, while holding manufacturers
responsible for higher than average N2O and CH4
emissions levels.
At this time, EPA is not proposing an adjustment value due to a
current lack of N2O test data on which to base the
adjustment for N2O. As discussed below, EPA and
manufacturers are currently evaluating N2O measurement
equipment and insufficient data is available at this time on which to
base an appropriate adjustment. For CH4, manufacturers
currently provide data during certification, and based on current
vehicle data a fleet-wide adjustment for CH4 in the range of
0.14 g/mile appears to be appropriate.\238\ EPA requests comments on
this concept and requests city and highway cycle N2O data on
current Tier 2 vehicles which could help serve as the basis for the
adjustment.
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\238\ Average city/highway cycle CH4 emissions based
on MY2010-2012 gasoline vehicles certification data is about 0.0056
g/mile; multiplied by the methane GWP of 25, this level would result
in a 0.14 g/mile adjustment. See memo to the docket, ``Analysis of
Methane (CH4) Certification Data for Model Year 2010-2012
Vehicles.''
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EPA continues to believe that it would not be appropriate to base
the adjustment on the cap standards because such an approach could have
the effect of undermining the stringency of the CO2
standards, as many vehicles would likely have CH4 and
N2O levels much lower than the cap standards. EPA believes
that if an appropriate adjustment could be developed and applied, it
would help alleviate manufacturers' concerns discussed above and make
the CO2-equivalent approach a more viable option.
b. N2O Measurement
For the N2O standard, EPA finalized provisions in the MY
2012-2016 rule allowing manufacturers to support an application for a
certificate by supplying a compliance statement based on good
engineering judgment, in lieu of N2O test data, through MY
2014. EPA required N2O testing starting with MY 2015. See 75
FR at 25423. This flexibility provided manufacturers with lead time
needed to make necessary
[[Page 74994]]
facilities changes and install N2O measurement equipment.
Since the final rule, manufacturers have raised concerns that the
lead-time provided to begin N2O measurement is not
sufficient, as their research and evaluation of N2O
measurement instrumentation has involved a greater level of effort than
previously expected. There are several analyzers available today for
the measurement of N2O. Over the last year since the MY
2012-2016 standards were finalized, EPA has continued to evaluate
instruments for N2O measurement and now believes instruments
not evaluated during the 2012-2016 rulemaking have the potential to
provide more precise emissions measurement and believe it would be
prudent to provide manufacturers with additional time to evaluate,
procure, and install equipment in their test cells.\239\ Therefore, EPA
believes that the manufacturer's concerns about the need for additional
lead-time have merit, and is proposing to extend the ability for
manufacturers to use compliance statements based on good engineering
judgment in lieu of test data through MY 2016. Beginning in MY 2017,
manufacturers would be required to measure N2O emissions to
verify compliance with the standard. This approach, if finalized, will
provide the manufacturers with two additional years of lead-time to
evaluate, procure, and install N2O measurement systems
throughout their certification laboratories.
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\239\ ``Data from the evaluation of instruments that measure
Nitrous Oxide (N2O),'' Memorandum from Chris Laroo to
Docket EPA-HQ-OAR-2010-0799, October 31, 2011.
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7. Small Entity Exemption
In the MY 2012-2016 rule, EPA exempted entities from the GHG
emissions standard, if the entity met the Small Business Administration
(SBA) size criteria of a small business as described in 13 CFR
121.201.\240\ This includes both U.S.-based and foreign small entities
in three distinct categories of businesses for light-duty vehicles:
small manufacturers, independent commercial importers (ICIs), and
alternative fuel vehicle converters. EPA is proposing to continue this
exemption for the MY 2017-2025 standards. EPA will instead consider
appropriate GHG standards for these entities as part of a future
regulatory action.
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\240\ See final regulations at 40 CFR 86.1801-12(j).
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EPA has identified about 21 entities that fit the Small Business
Administration (SBA) size criterion of a small business. EPA estimates
there currently are approximately four small manufacturers including
three electric vehicle small manufacturers that have recently entered
the market, eight ICIs, and nine alternative fuel vehicle converters in
the light-duty vehicle market. EPA estimates that these small entities
comprise less than 0.1 percent of the total light-duty vehicle sales in
the U.S., and therefore the exemption will have a negligible impact on
the GHG emissions reductions from the standards. Further detail
regarding EPA's assessment of small businesses is provided in
Regulatory Flexibility Act Section III.J.3.
At least one small business manufacturer, Fisker Automotive, in
discussions with EPA, has suggested that small businesses should have
the option of voluntarily opting-in to the GHG standards. This
manufacturer sells electric vehicles, and sees a potential market for
selling credits to other manufacturers. EPA believes that there could
be several benefits to this approach, as it would allow small
businesses an opportunity to generate revenue to offset their
technology investments and encourage commercialization of the
innovative technology, and it would benefit any manufacturer seeking
those credits to meet their compliance obligations. EPA is proposing to
allow small businesses to waive their small entity exemption and opt-in
to the GHG standards. Upon opting in, the manufacturer would be subject
to all of the requirements that would otherwise be applicable. This
would allow small entity manufacturers to earn CO2 credits
under the program, which may be an especially attractive option for the
new electric vehicle manufacturers entering the market. EPA proposes to
make the opt-in available starting in MY 2014, as the MY 2012, and
potentially the MY 2013, certification process will have already
occurred by the time this rulemaking is finalized. EPA is not proposing
to retroactively certify vehicles that have already been produced.
However, EPA proposes that manufacturers certifying to the GHG
standards for MY 2014 would be eligible to generate credits for
vehicles sold in MY 2012 and MY 2013 based on the number of vehicles
sold and the manufacturer's footprint-based standard under the primary
program that would have otherwise applied to the manufacturer if it
were a large manufacturer. This approach would be similar to that used
by EPA for early credits generated in MYs 2009-2011, where
manufacturers did not certify vehicles to CO2 standards in
those years but were able to generate credits. See 75 FR at 25441. EPA
believes it is appropriate to provide these credits to small entities,
as the credits would be available to large manufacturers producing
similar vehicles, and the credits further encourage manufacturers of
advanced technology vehicles such as EVs. In addition to benefiting
these small businesses, this option also has the potential to expand
the pool of credits available to be purchased by other manufacturers.
EPA proposes that manufacturers waiving their small entity exemption
would be required to meet all aspects of the GHG standards and program
requirements across their entire product line. EPA requests comments on
the small business provisions described above.
8. Additional Leadtime Issues
The 2012-2016 GHG vehicle standards include Temporary Leadtime
Allowance Alternative Standards (TLAAS) which provide alternative
standards to certain intermediate sized manufacturers (those with U.S.
sales between 5,000 and 400,000 during model year 2009) to accommodate
two situations: manufacturers which traditionally paid fines instead of
complying with CAFE standards, and limited line manufacturers facing
special compliance challenges due to less flexibility afforded by
averaging, banking and trading. See 75 FR at 25414-416. EPA is not
proposing to continue this program for MYs 2017-2025. First, the
allowance was premised on the need to provide adequate lead time, given
the (at the time the rule was finalized) rapidly approaching MY 2012
deadline, and given that manufacturers were transitioning from a CAFE
regime that allows fine-paying, to a Clean Air Act regime that does
not. That concern is no longer applicable, given that there is ample
lead time before the MY 2017 standards. More important, the Temporary
Lead Time Allowance was just that--temporary--and EPA provided it to
allow manufacturers to transition to full compliance in later model
years. See 75 FR at 25416. EPA is thus not proposing to continue this
provision.
In the context of the increasing stringency of standards in the
latter phase of the program (e.g., MY 2022-2025), one manufacturer
suggested that EPA should consider providing limited line, intermediate
volume manufacturers additional time to phase into the standards. The
concern raised is that such limited line manufacturers face unique
challenges securing competitive supplier contracts for new
technologies, and have fewer vehicle lines to allocate the necessary
upfront investment and risk inherent with new technology introduction.
This
[[Page 74995]]
manufacturer believes that as the standards become increasingly
stringent in future years requiring the investment in new or advanced
technologies, intermediate volume limited line manufacturers may have
to pay a premium to gain access to these technologies which would put
them at a competitive disadvantage. EPA seeks comment on this issue,
and whether there is a need to provide some type of additional leadtime
for intermediate volume limited line manufacturers to meet the latter
year standards.
In the context of the increasing stringency of standards starting
in MY 2017, as discussed, EPA is not proposing a continuation of the
TLAAS. TLAAS was available to firms with a wide range of U.S. sales
volumes (between 5,000 and 400,000 in MY 2009). One company with U.S.
sales on the order of 25,000 vehicles per year has indicated that it
believes that the CO2 standards in today's proposal for MY
2017-2025 would present significant technical challenges for their
company, due to the relatively small volume of products it sells in the
U.S., limited ability to average across their limited line fleet, and
the performance-oriented nature of its vehicles. This firm indicated
that absent access several years in advance to CO2 credits
that it could purchase from other firms, this firm would need to
significantly change the types of products they currently market in the
U.S. beginning in model year 2017, even if it adds substantial
CO2 reducing technology to its vehicles. EPA requests
comment on the potential need to include additional flexibilities for
companies with U.S. vehicle sales on the order of 25,000 units per
year, and what types of additional flexibilities would be appropriate.
Potential flexibilities could include an extension of the TLAAS program
for lower volume companies, or a one-to-three year delay in the
applicable model year standard (e.g., the proposed MY 2017 standards
could be delayed to begin in MY 2018, MY 2019, or MY 2020). Commenters
suggesting that additional flexibilities may be needed are encouraged
to provide EPA with data supporting their suggested flexibilities.
9. Police and Emergency Vehicle Exemption From CO2 Standards
Under EPCA, manufacturers are allowed to exclude police and other
emergency vehicles from their CAFE fleet and all manufacturers that
produce emergency vehicles have historically done so. EPA received
comments in the MY 2012-2016 rulemaking that these vehicles should be
exempt from the GHG emissions standards and EPA committed to further
consider the issue in a future rulemaking.\241\ After further
consideration of this issue, EPA proposes to exempt police and other
emergency vehicles from the CO2 standards starting in MY
2012.\242\ EPA believes it is appropriate to provide an exemption for
these vehicles because of the unique features of vehicles designed
specifically for law enforcement and emergency response purposes, which
have the effect of raising their GHG emissions, as well as for purposes
of harmonization with the CAFE program. EPA proposes to exempt vehicles
that are excluded under EPCA and NHTSA regulations which define
emergency vehicle as ``a motor vehicle manufactured primarily for use
as an ambulance or combination ambulance-hearse or for use by the
United States Government or a State or local government for law
enforcement, or for other emergency uses as prescribed by regulation by
the Secretary of Transportation.'' \243\
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\241\ 75 FR 25409.
\242\ Manufacturers would exclude police and emergency vehicles
from fleet average calculations (both for determining fleet
compliance levels and fleet standards) starting in MY 2012. Because
this would have the effect of making the fleet standards easier to
meet for manufacturers, EPA does not believe there would be lead
time issues associated with the exemption, even though it would take
effect well into MY 2012.
\243\ 49 U.S.C. 32902(e).
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The unique features of these vehicles result in significant added
weight including: heavy-duty suspensions, stabilizer bars, heavy-duty/
dual batteries, heavy-duty engine cooling systems, heavier glass,
bullet-proof side panels, and high strength sub-frame. Police pursuit
vehicles are often equipped with specialty steel rims and increased
rolling resistance tires designed for high speeds, and unique engine
and transmission calibrations to allow high-power, high-speed chases.
Police and emergency vehicles also have features that tend to reduce
aerodynamics, such as emergency lights, increased ground clearance, and
heavy-duty front suspensions.
EPA is concerned that manufacturers may not be able to sufficiently
reduce the emissions from these vehicles, and would be faced with a
difficult choice of compromising necessary vehicle features or dropping
vehicles from their fleets, as they may not have credits under the
fleet averaging provisions necessary to cover the excess emissions from
these vehicles as standards become more stringent. Without the
exemption, there could be situations where a manufacturer is more
challenged in meeting the GHG standards simply due to the inclusion of
these higher emitting emergency vehicles. Technical feasibility issues
go beyond those of other high-performance vehicles and there is a clear
public need for law enforcement and emergency vehicles that meet these
performance characteristics as these vehicles must continue to be made
available in the market. MY 2012-2016 standards, as well as MY 2017 and
later standards would be fully harmonized with CAFE regarding the
treatment of these vehicles. EPA requests comments on its proposal to
exempt emergency vehicles from the GHG standards.
10. Test Procedures
EPA is considering revising the procedures for measuring fuel
economy and calculating average fuel economy for the CAFE program,
effective beginning in MY 2017, to account for three impacts on fuel
economy not currently included in these procedures--increases in fuel
economy because of increases in efficiency of the air conditioner;
increases in fuel economy because of technology improvements that
achieve ``off-cycle'' benefits; and incentives for use of certain
hybrid technologies in full size pickup trucks, and for the use of
other technologies that help those vehicles exceed their targets, in
the form of increased values assigned for fuel economy. As discussed in
section IV of this proposal, NHTSA would take these changes into
account in determining the maximum feasible fuel economy standard, to
the extent practicable. In this section, EPA discusses the legal
framework for considering these changes, and the mechanisms by which
these changes could be implemented. EPA invites comment on all aspects
of this concept, and plans to adopt this approach in the final rule if
it determines the changes are appropriate after consideration of all
comments on these issues.
These changes would be the same as program elements that are part
of EPA's greenhouse gas performance standards, discussed in section
III.B.1 and 2, above. EPA is considering adopting these changes for A/C
efficiency and off-cycle technology because they are based on
technology improvements that affect real world fuel economy, and the
incentives for light-duty trucks will promote greater use of hybrid
technology to improve fuel economy in these vehicles. In addition,
adoption of these changes would lead to greater coordination between
the greenhouse gas program under the CAA and the fuel economy program
under EPCA. As discussed below, these three elements would be
implemented in the same
[[Page 74996]]
manner as in the EPA's greenhouse gas program--a vehicle manufacturer
would have the option to generate these fuel economy values for vehicle
models that meet the criteria for these ``credits,'' and to use these
values in calculating their fleet average fuel economy.
a. Legal Framework
EPCA provides that:
(c) Testing and calculation procedures. The Administrator [of
EPA] shall measure fuel economy for each model and calculate average
fuel economy for a manufacturer under testing and calculation
procedures prescribed by the Administrator. However * * *, the
Administrator shall use the same procedures for passenger
automobiles the Administrator used for model year 1975 * * *, or
procedures that give comparable results. 49 U.S.C. 32904(c)
Thus, EPA is charged with developing and adopting the procedures
used to measure fuel economy for vehicle models and for calculating
average fuel economy across a manufacturer's fleet. While this
provision provides broad discretion to EPA, it contains an important
limitation for the measurement and calculation procedures applicable to
passenger automobiles. For passenger automobiles, EPA has to use the
same procedures used for model year 1975 automobiles, or procedures
that give comparable results.\244\ This limitation does not apply to
vehicles that are not passenger automobiles. The legislative history
explains that:
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\244\ For purposes of this discussion, EPA need not determine
whether the changes relating to A/C efficiency, off-cycle, and
light-duty trucks involve changes to procedures that measure fuel
economy or procedures for calculating a manufacturer's average fuel
economy. The same provisions apply irrespective of which procedure
is at issue. This discussion generally refers to procedures for
measuring fuel economy for purposes of convenience, but the same
analysis applies whether a measurement or calculation procedure is
involved.
Compliance by a manufacturer with applicable average fuel
economy standards is to be determined in accordance with test
procedures established by the EPA Administrator. Test procedures so
established would be the procedures utilized by the EPA
Administrator for model year 1975, or procedures which yield
comparable results. The words ``or procedures which yield comparable
results'' are intended to give EPA wide latitude in modifying the
1975 test procedures to achieve procedures that are more accurate or
easier to administer, so long as the modified procedure does not
have the effect of substantially changing the average fuel economy
standards. H.R. Rep. No. 94-340, at 91-92 (1975).\245\
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\245\ Unlike the House Bill, the Senate bill did not restrict
EPA's discretion to adopt or revise test procedures. Senate Bill
1883, section 503(6). However, the Senate Report noted that:
The fuel economy improvement goals set in section 504 are based
upon the representative driving cycles used by the Environmental
Protection Agency to determine automobile fuel economies for model
year 1975. In the event that these driving cycles are changed in the
future, it is the intent of this legislation that the numerical
miles per gallon values of the fuel economy standards be revised to
reflect a stringency (in terms of percentage-improvement from the
baseline) that is the same as the bill requires in terms of the
present test procedures. S. Rep. No. 94-179, at 19 (1975).
In Conference, the House version of the bill was adopted, which
contained the restriction on EPA's authority.
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EPA measures fuel economy for the CAFE program using two different
test procedures--the Federal Test Procedure (FTP) and the Highway Fuel
Economy Test (HFET). These procedures originated in the early 1970's,
and were intended to generally represent city and highway driving,
respectively. These two tests are commonly referred to as the ``2-
cycle'' test procedures for CAFE. The FTP is also used for measuring
compliance with CAA emissions standards for vehicle exhaust. EPA has
made various changes to the city and highway fuel economy tests over
the years. These have ranged from changes to dynamometers and other
mechanical elements of testing, changes in test fuel properties,
changes in testing conditions, to changes made in the 1990s when EPA
adopted additional test procedures for exhaust emissions testing,
called the Supplemental Federal Test Procedures (SFTP).
When EPA has made changes to the FTP or HFET, we have evaluated
whether it is appropriate to provide for an adjustment to the measured
fuel economy results, to comply with the EPCA requirement for passenger
cars that the test procedures produce results comparable to the 1975
test procedures. These adjustments are typically referred to as a CAFE
or fuel economy test procedure adjustment or adjustment factor. In 1985
EPA evaluated various test procedure changes made since 1975, and
applied fuel economy adjustment factors to account for several of the
test procedure changes that reduced the measured fuel economy,
producing a significant CAFE impact for vehicle manufacturers. 50 FR
27172 (July 1, 1985). EPA defined this significant CAFE impact as any
change or group of changes that has at least a one tenth of a mile per
gallon impact on CAFE results. Id. at 27173. EPA also concluded in this
proceeding that no adjustments would be provided for changes that
removed the manufacturer's ability to take advantage of flexibilities
in the test procedure and derive increases in measured fuel economy
values which were not the result of design improvements or marketing
shifts, and which would not result in any improvement in real world
fuel economy. EPA likewise concluded that test procedure changes that
provided manufacturers with an improved ability to achieve increases in
measured fuel economy based on real world fuel economy improvements
also would not warrant a CAFE adjustment. Id. at 27172, 27174, 27183.
EPA adopted retroactive adjustments that had the effect of increasing
measured fuel economy (to offset test procedure changes that reduced
the measured fuel economy level) but declined to apply retroactive
adjustments that reduced fuel economy.
The DC Circuit reviewed two of EPA's decisions on CAFE test
procedure adjustments. Center for Auto Safety et al. v. Thomas, 806
F.2d 1071 (1986). First, the Court rejected EPA's decision to apply
only positive retroactive adjustments, as the appropriateness of an
adjustment did not depend on whether it increased or decreased measured
fuel economy results. Second, the Court upheld EPA's decision to not
apply any adjustment for the change in the test setting for road load
power. The 1975 test procedure provided a default setting for road load
power, as well as an optional, alternative method that allowed a
manufacturer to develop an alternative road load power setting. The
road load power setting affected the amount of work that the engine had
to perform during the test, hence it affected the amount of fuel
consumed during the test and the measured fuel economy. EPA changed the
test procedure by replacing the alternative method in the 1975
procedure with a new alternative coast down procedure. Both the
original and the replacement alternative procedures were designed to
allow manufacturers to obtain the benefit of vehicle changes, such as
changes in aerodynamic design, that improved real world fuel economy by
reducing the amount of work that the engine needed to perform to move
the vehicle. The Center for Auto Safety (CAS) argued that EPA was
required to provide a test procedure adjustment for the new alternative
coast down procedure as it increased measured fuel economy compared to
the values measured for the 1975 fleet. In 1975, almost no
manufacturers made use of the then available alternative method, while
in later years many manufacturers made use of the option once it was
changed to the coast down procedure. CAS argued this amounted to a
change in test procedure that did not achieve comparable results, and
therefore
[[Page 74997]]
required a test procedure adjustment. CAS did not contest that the
coast down method and the prior alternative method achieved comparable
results.
The DC Circuit rejected CAS' arguments, stating that:
The critical fact is that a procedure that credited reductions
in a vehicle's road load power requirements achieved through
improved aerodynamic design was available for MY1975 testing, and
those manufacturers, however few in number, that found it
advantageous to do so, employed that procedure. The manifold intake
procedure subsequently became obsolete for other reasons, but its
basic function, to measure real improvements in fuel economy through
more aerodynamically efficient designs, lived on in the form of the
coast down technique for measuring those aerodynamic improvements.
We credit the EPA's finding that increases in measured fuel economy
because of the lower road load settings obtainable under the coast
down method, were increases ``likely to be observed on the road,''
and were not ``unrepresentative artifact[s] of the dynamometer test
procedure.'' Such real improvements are exactly what Congress meant
to measure when it afforded the EPA flexibility to change testing
and calculating procedures. We agree with the EPA that no
retroactive adjustment need be made on account of the coast down
technique. Center for Auto Safety et al v. EPA, 806 F.2d 1071, 1077
(DC Cir. 1986)
Some years later, in 1996, EPA adopted a variety of test procedure
changes as part of updating the emissions test procedures to better
reflect real world operation and conditions. 61 FR 54852 (October 22,
1996). EPA adopted new test procedures to supplement the FTP, as well
as modifications to the FTP itself. For example, EPA adopted a new
supplemental test procedure specifically to address the impact of air
conditioner use on exhaust emissions. Since this new test directly
addressed the impact of A/C use on emissions, EPA removed the specified
A/C horsepower adjustment that had been in the FTP since 1975. Id. at
54864, 54873. Later EPA determined that there was no need for CAFE
adjustments for the overall set of test procedures changes to the FTP,
as the net effect of the changes was no significant change in CAFE
results.
As evidenced by this regulatory history, EPA's traditional approach
is to consider the impact of potential test procedure changes on CAFE
results for passenger automobiles and determine if a CAFE adjustment
factor is warranted to meet the requirement that the test procedure
produce results comparable to the 1975 test procedure. This involves
evaluating the magnitude of the impact on measured fuel economy
results. It also involves evaluating whether the change in measured
fuel economy reflects real word fuel economy impacts from changes in
technology or design, or whether it is an artifact of the test
procedure or test procedure flexibilities such that the change in
measured fuel economy does not reflect a real world fuel economy
impact.
In this case, allowing credits for improvements in air conditioner
efficiency and off-cycle efficiency for passenger cars would lead to an
increase (i.e., improvement) in the fuel economy results for the
vehicle model. The impact on fuel economy and CAFE results clearly
could be greater than one tenth of a mile per gallon (the level that
EPA has previously indicated as having a substantial impact). The
increase in fuel economy results would reflect real world improvements
in fuel economy and not changes that are just artifacts of the test
procedure or changes that come from closing a loophole or removing a
flexibility in the current test procedure. However, these changes in
procedure would not have the ``critical fact'' that the CAS Court
relied upon--the existence of a 1975 test provision that was designed
to account for the same kind of fuel economy improvements from changes
in A/C or off-cycle efficiency. Under EPA's traditional approach, these
changes would appear to have a significant impact on CAFE results,
would reflect real world changes in fuel economy, but would not have a
comparable precedent in the 1975 test procedure addressing the impact
of these technology changes on fuel economy. EPA's traditional approach
would be expected to lead to a CAFE adjustment factor for passenger
cars to account for the impact of these changes.
However, EPA is considering whether a change in approach is
appropriate based on the existence of similar EPA provisions for the
greenhouse gas emissions procedures and standards. In the past, EPA has
determined whether a CAFE adjustment factor for passenger cars would be
appropriate in a context where manufacturers are subject to a CAFE
standard under EPCA and there is no parallel greenhouse gas standard
under the CAA. That is not the case here, as MY2017-2025 passenger cars
will be subject to both CAFE and greenhouse gas standards. As such, EPA
is considering whether it is appropriate to consider the impact of a
CAFE procedure change in this broader context standard.
The term ``comparable results'' is not defined in section 32904(c),
and the legislative history indicates that it is intended to address
changes in procedure that result in a substantial change in the average
fuel economy standard. As explained above, EPA has considered a change
of one-tenth of a mile per gallon as having a substantial impact, based
in part on the one tenth of a mile per gallon rounding convention in
the statute for CAFE calculations. 48 FR 56526, 56528 fn.14 (December
21, 1983). A change in the procedure that changes fuel economy results
to this or a larger degree has the effect of changing the stringency of
the CAFE standard, either making it more or less stringent. A change in
stringency of the standard changes the burden on the manufacturers, as
well as the fuel savings and other benefits to society expected from
the standard. A CAFE adjustment factor is designed to account for these
impacts.
Here, however, there is a companion EPA standard for greenhouse gas
emissions. In this case, the changes would have an impact on the fuel
economy results and therefore the stringency of the CAFE standard, but
would not appear to have a real world impact on the burden placed on
the manufacturers, as the provisions would be the same as provisions in
EPA's greenhouse gas standards. Similarly it would not appear to have a
real world impact on the fuel savings and other benefits of the
National Program which would remain identical. If that is the case,
then it would appear reasonable to interpret section 32904(c) in these
circumstances as not restricting these changes in procedure for
passenger automobiles. The fuel economy results would be considered
``comparable results'' to the 1975 procedure as there would not be a
substantial impact on real world CAFE stringency and benefits, given
the changes in procedure are the same as provisions in EPA's companion
greenhouse gas procedures and standards. EPA invites comment on this
approach to interpreting section 32904(c), as well as the view that
this would not have a substantial impact on either the burden on
manufacturers or the benefits of the National Program.
EPA is also considering an alternative interpretation. Under this
interpretation, the reference to the 1975 procedures in section
32904(c) would be viewed as a historic reference point, and not a
codification of any specific procedures or fuel economy improvement
technologies. The change in procedure would be considered within EPA's
broad discretion to prescribe reasonable testing and calculation
procedures, as these changes reflect real world improvements in design
and accompanying real world improvements in fuel economy. The changes
in procedure would reflect real world fuel
[[Page 74998]]
economy improvements and increase harmonization with EPA's greenhouse
gas program. Since the changes in procedure have an impact on fuel
economy results and could have an impact on the stringency of the CAFE
standard, EPA could consider two different approaches to offsetting the
change in stringency.
In one approach EPA could maintain the stringency of the 2-cycle
(FTP and HFET) CAFE standard by adopting a corresponding adjustment
factor to the test results, ensuring that the stringency of the CAFE
standard was not substantially changed by the change in procedure. This
would be the traditional approach EPA has followed. Another approach
would be for NHTSA to maintain the stringency of the 2-cycle CAFE
standard by increasing that standard's stringency to offset any
reduction in stringency associated with changes that increase fuel
economy values. The effect of this adjustment to the standard would be
to maintain at comparable levels the amount of CAFE to be achieved
using technology whose effects on fuel economy are accounted for as
measured under the 1975 test procedures. The effect of the adjustment
to the standard would also typically be an additional amount of CAFE
that would have to be achieved, for example by technology whose effects
on fuel economy are not accounted for under the 1975 test procedures.
Under this interpretation, this would maintain the level of stringency
of the 2-cycle CAFE standard that would be adopted for passenger cars
absent the changes in procedure. As with the interpretation discussed
above, this alternative interpretation would be a major change from
EPA's past interpretation and practice. In this joint rulemaking the
alternative interpretation would apply to changes in procedure that are
the same as the companion EPA greenhouse gas program. However, that
would not be an important element in this alternative interpretation,
which would apply irrespective of the similarity with EPA's greenhouse
gas procedures and standards. EPA invites comment on this alternative
interpretation.
The discussion above focuses on the procedures for passenger cars,
as section 32904(c) only limits changes to the CAFE test and
calculation procedures for these automobiles. There is no such
limitation on the procedures for light-trucks. The credit provisions
for improvements in air conditioner efficiency and off-cycle
performance would apply to light-trucks as well. In addition, the
limitation in section 32904(c) does not apply to the provisions for
credits for use of hybrids in light-trucks, if certain criteria are
met, as these provisions apply to light-trucks and not passenger
automobiles.
b. Implementation of This Approach
As discussed in section IV, NHTSA would take these changes in
procedure into account in setting the applicable CAFE standards for
passenger cars and light-trucks, to the extent practicable. As in EPA's
greenhouse gas program, the allowance of AC credits for cars and trucks
results in a more stringent CAFE standard than otherwise would apply
(although in the CAFE program the AC credits would only be for AC
efficiency improvements, since refrigerant improvements do not impact
fuel economy). The allowance of off-cycle credits has been considered
in setting the CAFE standards for passenger car and light-trucks and
credits for hybrid use in light pick-up trucks has not been expressly
considered in setting the CAFE standards for light-trucks, because the
agencies did not believe that it was possible to quantify accurately
the extent to which manufacturers would rely on those credits, but if
more accurate quantification were possible, NHTSA would consider
incorporating those incentives into its stringency determination.
EPA further discusses the criteria and test procedures for
determining AC credits, off-cycle technology credits, and hybrid/
performance-based credits for full size pickup trucks in Section III.C
below.
C. Additional Manufacturer Compliance Flexibilities
1. Air Conditioning Related Credits
A/C is virtually standard equipment in new cars and trucks today.
Over 95% of the new cars and light trucks in the United States are
equipped with A/C systems. Given the large number of vehicles with A/C
in use in today's light duty vehicle fleet, their impact on the amount
of energy consumed and on the amount of refrigerant leakage that occurs
due to their use is significant.
EPA proposes that manufacturers be able to comply with their
fleetwide average CO2 standards described above by
generating and using credits for improved (A/C) systems. Because such
improved A/C technologies tend to be relatively inexpensive compared to
other GHG-reducing technologies, EPA expects that most manufacturers
would choose to generate and use such A/C compliance credits as a part
of their compliance demonstrations. For this reason, EPA has
incorporated the projected costs of compliance with A/C related
emission reductions into the overall cost analysis for the program. As
discussed in section II.F, and III.B.10, EPA, in coordination with
NHTSA, is also proposing that manufacturers be able to include fuel
consumption reductions resulting from the use of A/C efficiency
improvements in their CAFE compliance calculations. Manufacturers would
generate ``fuel consumption improvement values'' essentially equivalent
to EPA CO2 credits, for use in the CAFE program. The
proposed changes to the CAFE program to incorporate A/C efficiency
improvements are discussed below in section III.C.1.b.
As in the 2012-2016 final rule, EPA is structuring the A/C
provisions as optional credits for achieving compliance, not as
separate standards. That is, unlike standards for N2O and
CH4, there are no separate GHG standards related to AC
related emissions. Instead, EPA provides manufacturers the option to
generate A/C GHG emission reductions that could be used as part of
their CO2 fleet average compliance demonstrations. As in the
2012-2016 final rule, EPA also included projections of A/C credit
generation in determining the appropriate level of the proposed
standards.\246\
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\246\ See Section II.F above and Section IV below for more
information on the use of such credits in the CAFE program.
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In the time since the analyses supporting the 2012-2016 FRM were
completed, EPA has re-assessed its estimates of overall A/C emissions
and the fraction of those emissions that might be controlled by
technologies that are or will be available to manufacturers.\247\ As
discussed in more detail in Chapter 5 of the Joint TSD (see Section
5.1.3.2), the revised estimates remain very similar to those of the
earlier rule. This includes the leakage of refrigerant during the
vehicle's useful life, as well as the subsequent leakage associated
with maintenance and servicing, and with disposal at the end of the
vehicle's life (also called ``direct emissions''). The refrigerant
universally used today is HFC-134a with a global warming potential
(GWP) of 1,430.\248\ Together these leakage emissions are equivalent to
CO2 emissions of 13.8 g/
[[Page 74999]]
mi for cars and 17.2 g/mi for trucks. (Due to the high GWP of HFC-134a,
a small amount of leakage of the refrigerant has a much greater global
warming impact than a similar amount of emissions of CO2 or
other mobile source GHGs.) EPA also estimates that A/C efficiency-
related emissions (also called ``indirect'' A/C emissions), account for
CO2-equivalent emissions of 11.9 g/mi for cars and 17.1 g/mi
for trucks.\249\ Chapter 5 of the Joint TSD (see Section 5.1.3.2)
discusses the derivation of these estimates.
---------------------------------------------------------------------------
\247\ The A/C-related emission inventories presented in this
paragraph are discussed in Chapter 4 of the Draft RIA.
\248\ The global warming potentials (GWP) used in this rule are
consistent with the 100-year time frame values in the 2007
Intergovernmental Panel on Climate Change (IPCC) Fourth Assessment
Report (AR4). At this time, the 1996 IPCC Second Assessment Report
(SAR) 100-year GWP values are used in the official U.S. greenhouse
gas inventory submission to the United Nations Framework Convention
on Climate Change (per the reporting requirements under that
international convention, which were last updated in 2006).
\249\ Indirect emissions are additional CO2 emitted
due to the load of the A/C system on the engine.
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Achieving GHG reductions in the most cost-effective ways is a
primary goal of the program, and EPA believes that allowing
manufacturers to comply with the proposed standards by using credits
generated from incorporating A/C GHG-reducing technologies is a key
factor in meeting that goal.\250\ EPA accounts for projected reductions
from A/C related credits in developing the standards (curve targets),
and includes these emission reductions in estimating the achieved
benefits of the program. See Section II.D above.
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\250\ The recent GHG standards for medium and heavy duty
vehicles included separate standards for A/C leakage, rather than a
credit based approach. EPA did so because the quantity of these
leakage emissions is small relative to CO2 emissions from
driving and moving freight, so that a credit does not create
sufficient incentive to adopt leakage controls. 76 FR at 57118; 75
FR at 74211. EPA also did not adopt standards to control A/C leakage
from vocational vehicles, and did not adopt standards to control
indirect emissions from any medium or heavy duty vehicle for reasons
explained at 75 FR 74211 and 74212.
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Manufacturers can make very feasible improvements to their A/C
systems to reduce leakage and increase efficiency. Manufacturers can
reduce A/C leakage emissions by using components that tend to limit or
eliminate refrigerant leakage. Also, manufacturers can significantly
reduce the global warming impact of leakage emissions by adopting
systems that use an alternative, low-GWP refrigerant, acceptable under
EPA's SNAP program, as discussed below, especially if systems are also
designed to minimize leakage.\251\ Manufacturers can also increase the
overall efficiency of the A/C system and thus reduce A/C-related
CO2 emissions. This is because the A/C system contributes to
increased CO2 emissions through the additional work required
to operate the compressor, fans, and blowers. This additional work
typically is provided through the engine's crankshaft, and delivered
via belt drive to the alternator (which provides electric energy for
powering the fans and blowers) and the A/C compressor (which
pressurizes the refrigerant during A/C operation). The additional fuel
used to supply the power through the crankshaft necessary to operate
the A/C system is converted into CO2 by the engine during
combustion. This incremental CO2 produced from A/C operation
can thus be reduced by increasing the overall efficiency of the
vehicle's A/C system, which in turn will reduce the additional load on
the engine from A/C operation.
---------------------------------------------------------------------------
\251\ Refrigerant emissions during service, maintenance, repair,
and disposal are also addressed by the CAA Title VI stratospheric
ozone program, as described below.
---------------------------------------------------------------------------
As with the earlier GHG rule, EPA is proposing two separate credit
approaches to address leakage reductions and efficiency improvements
independently. A leakage reduction credit would take into account the
various technologies that could be used to reduce the GHG impact of
refrigerant leakage, including the use of an alternative refrigerant
with a lower GWP. An efficiency improvement credit would account for
the various types of hardware and control of that hardware available to
increase the A/C system efficiency. To generate credits toward
compliance with the fleet average CO2 standard,
manufacturers would be required to attest to the durability of the
leakage reduction and the efficiency improvement technologies over the
full useful life of the vehicle.
EPA believes that both reducing A/C system leakage and increasing
A/C efficiency would be highly cost-effective and technologically
feasible for light-duty vehicles in the 2017-2025 timeframe. EPA
proposes to maintain much of the existing framework for quantifying,
generating, and using A/C Leakage Credits and Efficiency Credits. EPA
expects that most manufacturers would choose to use these A/C credit
provisions, although some may choose not to do so. Consistent with the
2012-2016 final rule, the proposed standard reflects this projected
widespread penetration of A/C control technology.
The following table summarizes the maximum credits the EPA proposes
to make available in the overall A/C program.
[[Page 75000]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.068
The next table shows the credits on a model year basis that EPA
projects that manufacturers will generate on average (starting with the
ending values from the 2012-2016 final rule). In the 2012-2016 rule,
the total average car and total average truck credits accounted for the
difference between the GHG and CAFE standards.
[[Page 75001]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.069
The year-on-year progression of credits was determined as follows.
The credits are assumed to increase starting from their MY 2016 value
at a rate approximately commensurate with the increasing stringency of
the 2017-2025 GHG standards, but not exceeding a 20% penetration rate
increase in any given year, until the maximum credits are achieved by
2021. EPA expects that manufacturers would be changing over to
alternative refrigerants at the time of complete vehicle redesign,
which occurs about every 5 years, though in confidential meetings, some
manufacturers/suppliers have informed EPA that a modification of the
hardware for some alternative refrigerant systems may be able to be
done between redesign periods. Given the significant number of credits
for using low GWP refrigerants, as well as the variety of alternative
refrigerants that appear to be available, EPA believes that a total
phase-in of alternative refrigerants is likely to begin in the near
future and be completed by no later than 2021 (as shown in Table III-13
above). EPA requests comment on our assumptions for the phase-in rate
for alternative refrigerants.
The progression of the average credits (relative to the maximum)
also defines the relative year-on-year costs as described in Chapter 3
of the Joint TSD. The costs are proportioned by the ratio of the
average credit in any given year to the maximum credit. This is nearly
equivalent to proportioning costs to technology penetration rates as is
done for all the other technologies. However because the maximum
efficiency credits for cars and trucks have changed since the 2012-2016
rule, proportioning to the credits provides a more realistic and
smoother year-on-year sequencing of costs.\252\
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\252\ In contrast, the technology penetration rates could have
anomalous (and unrealistic) discontinuities that would be reflected
in the cost progressions. This issue is only specific to A/C credits
and costs and not to any other technology analysis in this proposal.
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EPA seeks comment on all aspects of the A/C credit program,
including changes from the current A/C credit program and the details
in the Joint TSD.
[[Page 75002]]
a. Air Conditioning Leakage (``Direct'') Emissions and Credits
i. Quantifying A/C Leakage Credits for Today's Refrigerant
As previously discussed, EPA proposes to continue the existing
leakage credit program, with minor modifications. Although in general
EPA continues to prefer performance-based standards whenever possible,
A/C leakage is very difficult to accurately measure in a laboratory
test, due to the typical slowness of such leaks and the tendency of
leakage to develop unexpectedly as vehicles age. At this time, no
appropriate performance test for refrigerant leakage is available.
Thus, as in the existing MYs 2012-2016 program, EPA would associate
each available leakage-reduction technology with associated leakage
credit value, which would be added together to quantify the overall
system credit, up to the maximum available credit. EPA's Leakage Credit
method is drawn from the SAE J2727 method (HFC-134a Mobile Air
Conditioning System Refrigerant Emission Chart, August 2008 version),
which in turn was based on results from the cooperative ``IMAC''
study.\253\ EPA is proposing to incorporate several minor modifications
that SAE is making to the J2727 method, but these do not affect the
proposed credit values for the technologies. Chapter 5 of the joint TSD
includes a full discussion of why EPA is proposing to continue the
design-based ``menu'' approach to quantifying Leakage Credits,
including definitions of each of the technologies associated with the
values in the menu.
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\253\ Society of Automotive Engineers, ``IMAC Team 1--
Refrigerant Leakage Reduction, Final Report to Sponsors,'' 2006.
This document is available in Docket EPA-HQ-OAR-2010-0799.
---------------------------------------------------------------------------
In addition to the above ``menu'' for vehicles using the current
high-GWP refrigerant (HFC-134a), EPA also proposes to continue to
provide the leakage credit calculation for vehicles using an
alternative, lower-GWP refrigerant. This provision was also a part of
the MYs 2012-2016 rule. As with the earlier rule, the agency is
including this provision because shifting to lower-GWP alternative
refrigerants would significantly reduce the climate-change concern
about HFC-134a refrigerant leakage by reducing the direct climate
impacts. Thus, the credit a manufacturer could generate is a function
of the degree to which the GWP of an alternative refrigerant is less
than that of the current refrigerant (HFC-134a).
In recent years, the global industry has given serious attention
primarily to three of the alternative refrigerants: HFO-1234yf, HFC-
152a, and carbon dioxide (R-744). Work on additional low GWP
alternatives continues. HFO1234yf, has a GWP of 4, HFC-152a has a GWP
of 124 and CO2 has a GWP of 1.\254\ Both HFC-152a and
CO2 are produced commercially in large amounts and thus,
supply of refrigerant is not a significant factor preventing
adoption.\255\ HFC-152a has been shown to be comparable to HFC-134a
with respect to cooling performance and fuel use in A/C systems.\256\
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\254\ IPCC 4th Assessment Report.
\255\ The U.S. has one of the largest industrial quality
CO2 production facilities in the world (Gale Group,
2011). HFC-152a is used widely as an aerosol propellant in many
commercial products and thus potentially available for refrigerant
use in motor vehicle A/C. Production volume for non-confidential
chemicals reported under the 2006 Inventory Update Rule. Chemical:
Ethane, 1,1-difluoro-. Aggregated National Production Volume: 50 to
<100 million pounds. [US EPA; Non-Confidential 2006 Inventory Update
Reporting. National Chemical Information. Ethane, 1,1-difluoro- (75-
37-6). Available from, as of September 21, 2009: http://cfpub.epa.gov/iursearch/index.cfm?s=chem&err=t.
\256\ United Nations Environment Program, Technology and
Economic Assessment Panel, ``Assessment of HCFCs and Environmentally
Sound Alternatives,'' TEAP 2010 Progress Report, Volume 1, May 2010.
http://www.unep.ch/ozone/Assessment_Panels/TEAP/Reports/TEAP_Reports/teap-2010-progress-report-volume1-May2010.pdf. This document
is available in Docket EPA-HQ-OAR-2010-0799.
---------------------------------------------------------------------------
In the MYs 2012-2016 GHG rule, a manufacturer using an alternative
refrigerant would receive no credit for leakage-reduction technologies.
At that time, EPA believed that from the perspective of primary climate
effect, leakage of a very low GWP refrigerant is largely irrelevant.
However, there is now reason to believe that the need for repeated
recharging (top-off) of A/C systems with another, potentially costly
refrigerant could lead some consumers and/or repair facilities to
recharge a system designed for use with an alternative, low GWP
refrigerant with either HFC-134a or another high GWP refrigerant.
Depending on the refrigerant, it may still be feasible, although not
ideal, for systems designed for a low GWP refrigerant to operate on
HFC-134a; in particular, the A/C system operating pressures for HFO-
1234yf and HFC-152a might allow their use. Thus, the need for repeated
recharging in use could slow the transition away from the high-GWP
refrigerant even though recharging with a refrigerant different from
that already in the A/C system is not authorized under current
regulations.\257\
---------------------------------------------------------------------------
\257\ See appendix D to 40 CFR part 82, subpart G.
---------------------------------------------------------------------------
For alternative refrigerant systems, EPA is proposing to add to the
existing credit calculation approach for alternative-refrigerant
systems a provision that would provide a disincentive for manufacturers
if systems designed to operate with HFO-1234yf, HFC-152a, R744, or some
other low GWP refrigerant incorporated fewer leakage-reduction
technologies. A system with higher annual leakage could then be
recharged with HFC-134a or another refrigerant with a GWP higher than
that with which the vehicle was originally equipped (e.g., HFO-1234yf,
CO2, or HFC-152a). Some stakeholders have suggested that EPA
take precautions to address the potential for HFC-134a to replace HFO-
1234yf, for example, in vehicles designed for use with the new
refrigerant (see comment and response section of EPA's SNAP rule on
HFO-1234yf, 76 FR 17509; March 29, 2011).\258\ In EPA's proposed
disincentive provision, manufacturers would avoid some or all of a
deduction in their Leakage Credit of about 2 g/mi by maintaining the
use of low-leak components after a transition to an alternative
refrigerant.
---------------------------------------------------------------------------
\258\ Regulations in Appendix D to Subpart G of 40 CFR part 82
prohibit topping off the refrigerant in a motor vehicle A/C system
with a different refrigerant.
---------------------------------------------------------------------------
ii. Issues Raised by a Potential Broad Transition to Alternative
Refrigerants
As described previously, use of alternative, lower-GWP refrigerants
for mobile use reduces the climate effects of leakage or release of
refrigerant through the entire life-cycle of the A/C system. Because
the impact of direct emissions of such refrigerants on climate is
significantly less than that for the current refrigerant HFC-134a,
release of these refrigerants into the atmosphere through direct
leakage, as well as release due to maintenance or vehicle scrappage, is
predictably less of a concern than with the current refrigerant. As
discussed above, there remains a concern, even with a low-GWP
refrigerant, that some repairs may repeatedly result in the replacement
of the lower-GWP refrigerant from a leaky A/C system with a readily-
available, inexpensive, high-GWP refrigerant.
For a number of years, the automotive industry has explored lower-
GWP refrigerants and the systems required for them to operate
effectively and efficiently, taking into account refrigerant costs,
toxicity, flammability, environmental impacts, and A/C system costs,
weight, complexity, and efficiency. European Union regulations require
a transition to alternative refrigerants with a GWP of 150 or less for
motor vehicle air conditioning. The European Union's Directive on
mobile
[[Page 75003]]
air-conditioning systems (MAC Directive \259\) aims at reducing
emissions of specific fluorinated greenhouse gases in the air-
conditioning systems fitted to passenger cars (vehicles under EU
category M1) and light commercial vehicles (EU category N1, class 1).
---------------------------------------------------------------------------
\259\ 2006/40/EC.
---------------------------------------------------------------------------
The main objectives of the EU MAC Directive are: to control leakage
of fluorinated greenhouse gases with a global warming potential (GWP)
higher than 150 used in this sector; and to prohibit by a specified
date the use of higher GWP refrigerants in MACs. The MAC Directive is
part of the European Union's overall objectives to meet commitments
made under the UNFCCC's Kyoto Protocol. This transition starts with new
car models in 2011 and continues with a complete transition to
manufacturing all new cars with low GWP refrigerant by January 1, 2017.
One alternative refrigerant has generated significant interest in
the automobile manufacturing industry and it appears likely to be used
broadly in the near future for this application. This refrigerant,
called HFO-1234yf, has a GWP of 4. The physical and thermodynamic
properties of this refrigerant are similar enough to HFC-134a that auto
manufacturers would need to make relatively minor technological changes
to their vehicle A/C systems in order to manufacture and market
vehicles capable of using HFO-1234yf. Although HFO-1234yf is flammable,
it requires a high amount of energy to ignite, and is expected to have
flammability risks that are not significantly different from those of
HFC-134a or other refrigerants found acceptable subject to use
conditions (76 FR 17494-17496, 17507; March 29, 2011).
There are some drawbacks to the use of HFO-1234yf. Some
technological changes, such as the addition of an internal heat
exchanger in the A/C system, may be necessary to use HFO-1234yf. In
addition, the anticipated cost of HFO-1234yf is several times that of
HFC-134a. At the time that EPA's Significant New Alternatives Policy
(SNAP) program issued its determination allowing the use of HFO-1234yf
in motor vehicle A/C systems, the agency cited estimated costs of $40
to $60 per pound, and stated that this range was confirmed by an
automobile manufacturer (76 FR 17491; March 29, 2011) and a component
supplier.\260\ By comparison, HFC-134a currently costs about $2 to $4
per pound.\261\ The higher cost of HFO-1234yf is largely because of
limited global production capability at this time. However, because it
is more complicated to produce the molecule for HFO-1234yf, it is
unlikely that it will ever be as inexpensive as HFC-134a is currently.
In Chapter 5 of the TSD (see Section 5.1.4), the EPA has accounted for
this additional cost of both the refrigerant as well as the hardware
upgrades.
---------------------------------------------------------------------------
\260\ Automotive News, April 18, 2011.21.
\261\ Ibid.
---------------------------------------------------------------------------
Manufacturers have seriously considered other alternative
refrigerants in recent years. One of these, HFC-152a, has a GWP of
124.\262\ HFC-152a is produced commercially in large amounts.\263\ HFC-
152a has been shown to be comparable to HFC-134a with respect to
cooling performance and fuel use in A/C systems.\264\ HFC-152a is
flammable, listed as A2 by ASHRAE.\265\ Air conditioning systems using
this refrigerant would require engineering strategies or devices in
order to reduce flammability risks to acceptable levels (e.g., use of
release valves or secondary-loop systems). In addition, CO2
can be used as a refrigerant. It has a GWP of 1, and is widely
available commercially.\266\ Air conditioning systems using
CO2 would require different designs than other refrigerants,
primarily due to the higher operating pressures that are required.
Reesearch continues exploring the potential for these alternative
refrigerants for automotive applications. Finally, EPA is aware that
the chemical and automobile manufacturing industries continue to
consider additional refrigerants with GWPs less than 150. For example,
SAE International is currently running a cooperative research program
looking at two low GWP refrigerant blends, with the program to complete
in 2012.\267\ The producers of these blends have not to date applied
for SNAP approval. However, we expect that there may well be additional
alternative refrigerants available to vehicle manufacturers in the next
few years.
---------------------------------------------------------------------------
\262\ IPCC 4th Assessment Report.
\263\ HFC-152a is used widely as an aerosol propellant in many
commercial products and may potentially be available for refrigerant
use in motor vehicle A/C systems. Aggregated national production
volume is estimated to be between 50 and 100 million pounds. [US
EPA; Non-Confidential 2006 Inventory Update Reporting. National
Chemical Information.]
\264\ May 2010 TEAP XXI/9 Task Force Report, http://www.unep.ch/ozone/Assessment_Panels/TEAP/Reports/TEAP_Reports/teap-2010-progress-report-volume1-May2010.pdf.
\265\ A wide range of concentrations has been reported for HFC-
152a flammability where the gas poses a risk of ignition and fire
(3.7%-20% by volume in air) (Wilson, 2002). EPA finalized a rule in
2008 listing HFC-152a as acceptable subject to use conditions in
motor vehicle air-conditioning, one of these restricting refrigerant
concentrations in the passenger compartment resulting from leaks
above the lower flammability limit of 3.7% (see 71 FR 33304; June
12, 2008).
\266\ The U.S. has one of the largest industrial quality
CO2 production facilities in the world (Gale Group,
2011).
\267\ ``Recent Experiences in MAC System Development: `New
Alternative Refrigerant Assessment' Technical Update. Enrique Peral-
Antunez, Renault. Presentation at SAE Alternative Refrigerant and
System Efficiency Symposium. September, 2011. Available online at
http://www.sae.org/events/aars/presentations/2011/Enrique%20Peral%20Renault%20Recent%20Experiences%20in%20MAC%20System%20Dev.pdf .
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(1) Related EPA Actions to Date and Potential Actions Concerning
Alternative Refrigerants
EPA is addressing potential environmental and human health concerns
of low-GWP alternative refrigerants through a number of actions. The
SNAP program has issued final rules regulating the use of HFC-152a and
HFO-1234yf in order to reduce their potential risks (June 12, 2008, 73
FR 33304; March 29, 2010, 76 FR 17488). The SNAP rule for HFC-152a
allows its use in new motor vehicle A/C systems where proper
engineering strategies and/or safety devices are incorporated into the
system. The SNAP rules for both HFC-152a and HFO-1234yf require meeting
safety requirements of the industry standard SAE J639. With both
refrigerants, EPA expects that manufacturers conduct and keep on file
failure mode and effect analysis for the motor vehicle A/C system, as
stated in SAE J1739. EPA has also proposed a rule that would allow use
of carbon dioxide as a refrigerant subject to use conditions for motor
vehicle A/C systems (September 21, 2006; 71 FR 55140). EPA expects to
finalize a rule for use of carbon dioxide in motor vehicle A/C systems
in 2012.
Under Section 612(d) of the Clean Air Act, any person may petition
EPA to add alternatives to or remove them from the list of acceptable
substitutes for ozone depleting substances. The National Resource
Defense Council (NRDC) submitted a petition on behalf of NRDC, the
Institute for Governance & Sustainable Development (IGSD), and the
Environmental Investigation Agency-US (EIA-US) to EPA under Clean Air
Act Section 612(d), requesting that the Agency remove HFC-134a from the
list of acceptable substitutes and add it to the list of unacceptable
(prohibited) substitutes for motor vehicle A/C, among other uses.\268\
EPA has found this
[[Page 75004]]
petition complete specifically for use of HFC-134a in new motor vehicle
A/C systems for use in passenger cars and light duty vehicles. EPA
intends to initiate a separate notice and comment rulemaking in
response to this petition in the future.
---------------------------------------------------------------------------
\268\ NRDC et al. Re: Petition to Remove HFC-134a from the List
of Acceptable Substitutes under the Significant New Alternatives
Policy Program (November 16, 2010).
---------------------------------------------------------------------------
EPA expects to address potential toxicity issues with the use of
CO2 as a refrigerant in automotive A/C systems in the
upcoming final SNAP rule mentioned above. CO2 has a
workplace exposure limit of 5000 pm on a 8-hour time-weighted
average.\269\ EPA has also addressed potential toxicity issues with
HFO-1234yf through a significant new use rule (SNUR) under the Toxic
Substances Control Act (TSCA) (October 27, 2010; 75 FR 65987). The SNUR
for HFO-1234yf allows its use as an A/C refrigerant for light-duty
vehicles and light-duty trucks, and found no significant toxicity
issues with that use. As mentioned in the NPRM for a VOC exemption for
HFO-1234yf, ``The EPA considered the results of developmental testing
available at the time of the final SNUR action to be of some concern,
but not a sufficient basis to find HFO-1234yf unacceptable under the
SNUR determination. As a result, the EPA requested additional toxicity
testing and issued the SNUR for HFO-1234yf. The EPA has received and is
presently reviewing the results of the additional toxicity testing. The
EPA continues to believe that HFO-1234yf, when used in new automobile
air conditioning systems in accordance with the use conditions under
the SNAP rule, does not result in significantly greater risks to human
health than the use of other available substitutes.'' (76 FR 64063,
October 17, 2011). HFC-152a is considered relatively low in toxicity
and comparable to HFC-134a, both of which have a workplace
environmental exposure limit from the American Industrial Hygiene
Association of 1000 ppm on an 8-hour time-weighted average (73 FR
33304; June 12, 2008).
---------------------------------------------------------------------------
\269\ The 8-hour time-weighted average worker exposure limit for
CO2 is consistent with OSHA's PEL-TWA, and ACGIH'S TLV-
TWA of 5,000 ppm (0.5%).
---------------------------------------------------------------------------
EPA has issued a proposed rule, proposing to exempt HFO-1234yf from
the definition of ``volatile organic compound'' (VOC) for purposes of
preparing State implementation Plans (SIPs) to attain the national
ambient air quality standards for ozone under Title I of the Clean Air
Act (October 17, 2011; 76 FR 64059). VOCs are a class of compounds that
can contribute to ground level ozone, or smog, in the presence of
sunlight. Some organic compounds do not react enough with sunlight to
create significant amounts of smog. EPA has already determined that a
number of compounds, including the current automotive refrigerant, HFC-
134a as well as HFC-152a, are low enough in photochemical reactivity
that they do not need to be regulated under SIPs. CO2 is not
considered a volatile organic compound (VOC) for purposes of preparing
SIPs.
(2) Vehicle Technology Requirements for Alternative Refrigerants
As discussed above, significant hardware changes could be needed to
allow use of HFC-152a or CO2, because of the flammability of
HFC-152a and because of the high operating pressure required for
CO2. In the case of HFO-1234yf, manufacturers have said that
A/C systems for use with HFO-1234yf would need a limited amount of
additional hardware to maintain cooling efficiency compared to HFC-
134a. In particular, A/C systems may require an internal heat exchanger
to use HFO-1234yf, because HFO-1234yf would be less effective in A/C
systems not designed for its use. Because EPA's SNAP ruling allows only
for its use in new vehicles, we expect that manufacturers would
introduce cars using HFO-1234yf only during complete vehicle redesigns
or when introducing new models.\270\ EPA expects that the same would be
true for other alternative refrigerants that are potential candidates
(e.g., HFC-152a and CO2). This need for complete vehicle
redesign limits the potential pace of a transition from HFC-134a to
alternative refrigerants. In meetings with EPA, manufacturers have
informed EPA that, in the case of HFO-1234yf, for example, they would
need to upgrade their refrigerant storage facilities and charging
stations on their assembly lines. During the transition period between
the refrigerants, some of these assembly lines might need to have the
infrastructure for both refrigerants simultaneously since many lines
produce multiple vehicle models. Moreover, many of these plants might
not immediately have the facilities or space for two refrigerant
infrastructures, thus likely further increasing necessary lead time.
EPA took these kinds of factors into account in estimating the
penetration of alternative refrigerants, and the resulting estimated
average credits over time shown in Table III-13.
---------------------------------------------------------------------------
\270\ Some suppliers and manufacturers have informed us that
some vehicles may be able to upgrade A/C systems during a refresh of
an existing model (between redesign years). However, this is highly
dependent on the vehicle, space constraints behind the dashboard,
and the manufacturing plant, so an upgrade may be feasible for only
a select few models.
---------------------------------------------------------------------------
Switching to alternative refrigerants in the U.S. market continues
to be an attractive option for automobile manufacturers because
vehicles with low GWP refrigerant could qualify for a significantly
larger leakage credit. Manufacturers have expressed to EPA that they
would plan to place a significant reliance on, or in some cases believe
that they would need, alternative refrigerant credits for compliance
with GHG fleet emission standards starting in MY 2017.
(3) Alternative Refrigerant Supply
EPA is aware that another practical factor affecting the rate of
transition to alternative refrigerants is their supply. As mentioned
above, both HFC-152a and CO2 are being produced commercially
in large quantities and thus, although their supply chain does not at
this time include auto manufacturers, it may be easier to increase
production to meet additional demand that would occur if manufacturers
adopt either as a refrigerant. However, for the newest refrigerant
listed under the SNAP program, HFO-1234yf, supply is currently limited.
There are currently two major producers of HFO-1234yf, DuPont and
Honeywell, that are licensed to produce this chemical for the U.S.
market. Both companies will likely provide most of their production for
the next few years from a single overseas facility, as well as some
production from small pilot plants. The initial emphasis for these
companies is to provide HFO-1234yf to the European market, where
regulatory requirements for low GWP refrigerants are already in effect.
These same companies have indicated that they plan to construct a new
facility in the 2014 timeframe and intend to issue a formal
announcement about that facility close to the end of this calendar
year. This facility should be designed to provide sufficient production
volume for a worldwide market in coming years. EPA expects that the
speed of the transition to alternative refrigerants in the U.S. may
depend on how rapidly chemical manufacturers are able to provide supply
to automobile manufacturers sufficient to allow most or all vehicles
sold in the U.S. to be built using the alternative refrigerant.
One manufacturer (GM) has announced its intention to begin
introducing vehicle models using HFO-
[[Page 75005]]
1234yf as early as MY 2013.\271\ EPA is not aware of other companies
that have made a public commitment to early adoption of HFO-1234yf or
other alternative refrigerants. As described above, we expect that in
most cases a change-over to systems designed for alternative
refrigerants would be limited to vehicle product redesign cycles,
typically about every 5 years. Because of this, the pace of
introduction is likely to be limited to about 20% of a manufacturer's
fleet per year. In addition, the current uncertainty about the
availability of supply of the new refrigerant in the early years of
introduction into vehicles in the U.S. vehicles, also discussed above,
means that the change-over may not occur at every vehicle redesign
point. Thus, even with the announced intention of this one manufacturer
to begin early introduction of an alternative refrigerant, EPA's
analysis of the overall industry trend will assume minimal penetration
of the U.S. vehicle market before MY 2017.
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\271\ General Motors Press Release, July 23, 2010. ``GM First to
Market Greenhouse Gas-Friendly Air Conditioning Refrigerant in
U.S''.
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Table III-13 shows that, starting from MY 2017, virtually all of
the expected increase in generated credits would be due to a gradual
increase in penetration of alternative refrigerants. In earlier model
years, EPA attributes the expected increase in Leakage Credits to
improvements in low-leak technologies.
(4) Projected Potential Scenarios for Auto Industry Changeover to
Alternative Refrigerants
As discussed above, EPA is planning on issuing a proposed SNAP
rulemaking in the future requesting comment on whether to move HFC-134a
from the list of acceptable substitutes to the list of unacceptable
(prohibited) substitutes. However, the agency has not determined the
specific content of that proposal, and the results of any final action
are unknowable at this time. EPA recognizes that a major element of
that proposal will be the evaluation of the time needed for a
transition for automobile manufacturers away from HFC-134a. Thus, there
could be multiple scenarios for the timing of a transition considered
in that future proposed rulemaking. Should EPA finalize a rule under
the SNAP program that prohibits the use of HFC-134a in new vehicles,
the agency plans to evaluate the impacts of such a SNAP rule to
determine whether it would be necessary to consider revisions to the
availability and use of the compliance credit for MY 2017-2025.
For purposes of this proposed GHG rule, EPA is assuming the current
status, where there are no U.S. regulatory requirements for
manufacturers to eliminate the use of HFC-134a for newly manufactured
vehicles. Thus, the agency would expect that the market penetration of
alternatives will proceed based on supply and demand and the strong
incentives in this proposal. Given the combination of clear interest
from automobile manufacturers in switching to an alternative
refrigerant, the interest from HFO-1234yf alternative refrigerant
manufacturers to expand their capacity to produce and market the
refrigerant, and current commercial availability of HFC-152a and
CO2, EPA believes it is reasonable to project that supply
would be adequate to support the orderly rate of transition to an
alternative refrigerant described above. As mentioned earlier, at least
one U.S. manufacturer already has plans to introduce models using the
alternative refrigerant HFO-1234yf beginning in MY 2013. However, it is
not certain how widespread the transition to a alternative refrigerants
will be in the U.S., nor how quickly that transition will occur in the
absence of requirements or strong incentives.
There are other situations that could lead to an overall fleet
changeover from HFC-134a to alternative refrigerants. For example, the
governments of the U.S., Canada, and Mexico have proposed to the
Parties to the Montreal Protocol on Substances that Deplete the Ozone
Layer that production of HFCs be reduced over time. The North American
Proposal to amend the Montreal Protocol allows the global community to
make near-term progress on climate change by addressing this group of
potent greenhouse gases. The proposal would result in lower emissions
in developed and developing countries through the phase-down of the
production and consumption of HFCs. If an amendment were adopted by the
Parties, then switching from HFC-134a to alternative refrigerants would
likely become an attractive option for decreasing the overall use and
emissions of high-GWP HFCs, and the Parties would likely initiate or
expand policies to incentivize suppliers to ramp up the supply of
alternative refrigerants. Options for reductions would include
transition from HFCs, moving from high to lower GWP HFCs, and reducing
charge sizes.
EPA requests comment on the implications for the program of the
refrigerant transition scenario assumed for the analyses supporting
this NPRM; that is, where there are no U.S. regulatory requirements for
manufacturers to eliminate the use of HFC-134a for newly manufactured
vehicles. EPA requests comment on factors that may affect the industry
demand for refrigerant and its U.S. and international supply.
b. Air Conditioning Efficiency (``Indirect'') Emissions and Credits
In addition to the A/C leakage credits discussed above, EPA is
proposing credits for improving the efficiency of--and thus reducing
the CO2 emissions from--A/C systems. Manufacturers have
available a number of very cost-effective technology options that can
reduce these A/C-related CO2 emissions, which EPA estimates
are currently on average 11.9 g/mi for cars and 17.1 for trucks
nationally.\272\ When manufacturers incorporate these technologies into
vehicles that clearly result in reduced CO2 emissions, EPA
believes that A/C Efficiency Credits are warranted. Based on extensive
industry testing and EPA analysis, the agency proposes that eligible
efficiency-improving technologies be limited to up to a maximum 42%
improvement,\273\ which translates into a maximum credit value of 5.0
g/mi for cars and 7.2 g/mi for trucks.
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\272\ EPA derived these estimates using a sophisticated new
vehicle simulation tool that EPA has developed since the completion
of the MYs 2012-2016 final rule. Although results are very similar
to those in the earlier rule, EPA believes they represent more
accurate estimates. Chapter 5 of the Joint TSD presents a detailed
discussion of the development of the simulation tool and the
resulting emissions estimates.
\273\ The cooperative IMAC study mentioned above concluded that
these emissions can be reduced by as much as 40% through the use of
these technologies. In addition, EPA has concluded that improvements
in the control software for the A/C system, including more precise
control of such components as the radiator fan and compressor, can
add another 2% to the emission reductions. In total, EPA believes
that a total maximum improvement of 42% is available for A/C
systems.
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As discussed further in Section III.C.1.b.iii below, under its EPCA
authority, EPA is proposing, in coordination with NHTSA, to allow
manufacturers to generate fuel consumption improvement values for
purposes of CAFE compliance based on the use of A/C efficiency
technologies. EPA is proposing that both the A/C efficiency credits
under EPA's GHG program and the A/C efficiency fuel consumption
improvement values under the CAFE program would be based on the same
methodologies and test procedures, as further described below.
i. Quantifying A/C Efficiency Credits
In the 2012-2016 rule, EPA proposed that A/C Efficiency Credits be
calculated based on the efficiency-improving
[[Page 75006]]
technologies included in the vehicle. The design-based approach,
associating each technology with a specific credit value, was a
surrogate for a using a performance test to determine credit values.
Although EPA generally prefers measuring actual emissions performance
to a design-based approach, measuring small differences in A/C
CO2 emissions is very difficult, and an accurate test
procedure capable of determining such differences was not available.
In conjunction with the (menu or) design-based calculation, EPA
continues to believe it is important to verify that the technologies
installed to generate credits are improving the efficiency of the A/C
system. In the 2012-2016 rule, EPA required that manufacturers submit
data from an A/C CO2 Idle Test as a prerequisite to
accessing the design-based credit calculation method. Beginning in MY
2014, manufacturers wishing to generate the A/C Efficiency Credits need
to meet a CO2 emissions threshold on the Idle Test.
As manufacturers have begun to evaluate the Idle Test requirements,
they have made EPA aware of an issue with the test's original design.
In the MYs 2012-2016 rule, EPA received comments that the Idle Test did
not properly capture the efficiency impact of some of the technologies
on the Efficiency Credit menu list. EPA also received comments that
idle operation is not typical of real-world driving. EPA acknowledges
that both of these comments have merit. At the time of the MY 2012-2016
rule, we expected that many manufacturers would be able to demonstrate
improved efficiency with technologies like forced cabin air
recirculation or electronically-controlled, and variable-displacement
compressors., But under idle conditions, testing by manufacturers has
shown that the benefits from these technologies can be difficult to
quantify. Also, recent data provided by the industry shows that some
vehicles that incorporate higher-efficiency A/C technologies are not
able to consistently reach the CO2 threshold on the current
Idle Test. The available data also indicates that meeting the threshold
tends to be more difficult for vehicles with smaller-displacement
engines.\274\ EPA continues to believe that there are some technologies
that do have their effectiveness demonstrated during idle and that idle
is a significant fraction of real-world operation.\275\
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\274\ Chapter 5 of the Joint TDS provides details about the
manufacturers' testing of these vehicles.
\275\ More discussion of real world idle operation can be found
below and in chapter 5 of the joint TSD in the description of stop-
start off cycle credits.
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Although EPA believes some adjustments in the Idle Test are
warranted and is proposing such adjustments, the agency also believes
that a reasonable degree of verification is still needed, to
demonstrate that that A/C efficiency-improving technologies for which
manufacturers are basing credits are indeed implemented properly and
are reducing A/C-related fuel consumption. EPA continues to believe
that the Idle Test is a reasonable measure of some A/C-related
CO2 emissions as there is significant real-world driving
activity at idle, and it significantly exercises a number of the A/C
technologies from the menu. Therefore, EPA proposes to maintain the use
of Idle Test as a prerequisite for generating Efficiency Credits for
MYs 2014-2016. However, in order to provide reasonable verification
while encouraging the development and use of efficiency-improving
technologies, EPA proposes to revise the CO2 threshold.
Specifically, the agency proposes to scale the magnitude of the
threshold to the displacement of the vehicle's engine, with smaller-
displacement engines having a higher ``grams per minute'' threshold
than larger-displacement engines. Thus, for vehicles with smaller-
displacement engines, the threshold would be less stringent. The
revised threshold would apply for MYs 2014-2016, and can be used
(optionally) instead of the flat gram per minute threshold that applies
for MYs 2014, through 2016.\276\ In addition to revising the threshold,
EPA proposes to relax the average ambient temperature and humidity
requirements, due to the difficulty in controlling the year-round
humidity in test cells designed for FTP testing. EPA requests comment
on the proposed continued use of the Idle Test as a tool to validate
the function of a vehicle's A/C efficiency-improving technologies, and
on the revised CO2 threshold and ambient requirements.
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\276\ Chapter 5 of the Joint TSD describes the available data
relevant to testing on the Idle Test and to the design of the
displacement-weighted revised threshold in more detail.
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As stated above, EPA still considers the Idle Test to be a
reasonable measure of some A/C-related CO2 emissions.
However, there are A/C efficiency-improving technologies that cannot be
fully evaluated with the Idle Test. In addition to proposing the
revised Idle Test, EPA proposes that manufacturers have the option of
reporting results from a new transient A/C test in place of the Idle
Test, for MYs 2014-2016. In the year since the previous GHG rule was
finalized, EPA, CARB, and a consortium of auto manufacturers (USCAR)
have developed a new transient test procedure that can measure the
effect of the operation of the overall A/C system on CO2
emissions and fuel economy. The new test, known as ``AC17'' (for Air
Conditioning, 2017), and described in detail in Chapter 5 of the Joint
TSD, is essentially a combination of the existing SC03 and HWFET test
procedures, which, with the proposed modifications, would exercise the
A/C system (and new technologies) under conditions representing typical
U.S. driving and climate.
Some aspects of the AC17 test are still being developed and
improved, but the basic procedure is sufficiently complete for EPA to
propose it as a reporting option alternative to the Idle Test threshold
in 2014, and a replacement for the Idle Test in 2017, as a prerequisite
for generating Efficiency Credits. In model years 2014 to 2016, the
AC17 test would be used to demonstrate that a vehicle's A/C system is
delivering the efficiency benefits of the new technologies, and the
menu will still be utilized. Manufacturers would run the AC17 test
procedure on each vehicle platform that incorporates the new
technologies, with the A/C system off and then on, and then report
these test results to the EPA. This reporting option would replace the
need for the Idle Test. In addition to reporting the test results, EPA
will require that manufactures provide detailed vehicle and A/C system
information for each vehicle tested (e.g. vehicle class, model type,
curb weight, engine size, transmission type, interior volume, climate
control type, refrigerant type, compressor type, and evaporator/
condenser characteristics).
For model years 2017 and beyond, the A/C Idle Test menu and
threshold requirement would be eliminated and be replaced with the AC17
test, as a prerequisite for access to the credit menu. For vehicle
models which manufacturers are applying for A/C efficiency credits, the
AC17 test would be run to validate that the performance and efficiency
of a vehicle's A/C technology is commensurate to the level of credit
for which the manufacturer is applying. To determine whether the
efficiency improvements of these technologies are being realized on the
vehicle, the results of an AC17 test performed on a new vehicle model
would be compared to a ``baseline'' vehicle which does not incorporate
the efficiency-improving technologies. If the difference between the
new vehicle's AC17 test result and the baseline vehicle test result is
greater than or equal to the amount of menu credit for
[[Page 75007]]
which the manufacturer is applying, then the menu credit amount would
be generated. However, if the difference in test results did not
demonstrate the full menu-based potential of the technology, a partial
credit could still be generated. This partial credit would be
proportional to how far the difference in results was from the expected
menu-based credit (i.e., the sum of the individual technology credits).
The baseline vehicle is defined as one with characteristics which are
similar to the new vehicle, except that it is not equipped with the
efficiency-improving technologies (or they are de-activated). EPA is
seeking comment on this approach to qualifying for A/C efficiency
credits.
The AC17 test requires a significant amount of time for each test
(nearly 4 hours) and must be run in expensive SC03-capable facilities.
EPA believes that the purpose of the test--to validate that A/C
CO2 reductions are indeed occurring and hence that the
manufacturer is eligible for efficiency credits--would be met if the
manufacturer performs the new test on a limited subset of test
vehicles. EPA proposes that manufacturers wishing to use the AC17 test
to validate a vehicle's A/C technology be required to test one vehicle
from each platform. For this purpose, ``platform'' would be defined as
a group of vehicles with common body floorplan, chassis, engine, and
transmission.\277\ EPA requests comment on the new test and its
proposed use. EPA also requests comment on using the AC17 test to
quantify efficiency credits, instead of the menu. EPA is also seeking
comment on an option starting in MY 2017, to have the AC17 test be used
in a similar fashion as the Idle Test, such that if the CO2
measurements are below a certain threshold value, then credit would be
quantified based on the menu. EPA also seeks comment on eliminating the
idle test in favor of reporting only the AC17 test for A/C efficiency
credits starting as early as MY 2014.
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\277\ A single platform may encompass a larger group of fuel
economy label classes or car lines (40 CFR Sec. 600.002-93), such
as passenger cars, compact utility vehicles, and station wagons The
specific vehicle selection requirements for manufacturers using this
testing are laid out in the regulations associated with this NPRM.
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ii. Potential Future Use of the New A/C Test for Credit Quantification
As described above, EPA is proposing to use the AC17 test as a
prerequisite to generating A/C Efficiency Credits. The test is well-
suited for this purpose since it can accurately measure the difference
in the increased CO2 emissions that occur when the A/C
system is turned on vs. when it is turned off. This difference in the
``off-on'' CO2 emissions, along with details about the
vehicle and its A/C system design, will help inform EPA as to how these
efficiency-improving technologies perform on a wide variety of vehicle
types.
However, the test is limited in its ability to accurately quantify
the amount of credit that would be warranted by an improved A/C system
on a particular vehicle. This is because to determine an absolute--
rather than a relative--difference in CO2 effect for an
individual vehicle design would require knowledge of the A/C system
CO2 performance for that exact vehicle, but without those
specific A/C efficiency improvements installed. This would be difficult
and costly, since two test vehicles (or a single vehicle with the
components removed and replaced) would be necessary to quantify this
precisely. Even then, the inherent variability between such tests on
such a small sample in such an approach might not be statistically
robust enough to confidently determine a small absolute CO2
emissions impact between the two vehicles.
As an alternative to comparing new vehicle AC17 test with a
``baseline'' (described above), in Chapter 5 of the Joint TSD, EPA
discusses a potential method of more accurately quantifying the credit.
This involves comparing the efficiencies of individual components
outside the vehicles, through ``bench'' testing of components
supplemented by vehicle simulation modeling to relate that component's
performance to the complete vehicle. EPA believes that such approaches
may eventually allow the AC17 test to be used as part of a more
complicated series of test procedures and simulations, to accurately
quantify the A/C CO2 effect of an individual vehicle's A/C
technology package. However, EPA believes that this issue is beyond the
scope of this proposed rule since there are many challenges associated
with measuring small incremental decreases in fuel consumption and
CO2 emissions compared to the relatively large overall fuel
consumption rate and CO2 emissions. The agency does
encourage comment, including test data, on how the AC17 test could be
enhanced in order to measure the individual and collective impact of
different A/C efficiency-improving technologies on individual vehicle
designs and thus to quantify Efficiency Credits. EPA especially seeks
comment on a more complex procedure, also discussed in Chapter 5 of the
Joint TSD, that uses a combination of bench testing of components,
vehicle simulation models, and dynamometer testing to quantify
Efficiency Credits. Specifically, the agencies request comment on how
to define the baseline configuration for bench testing. The agencies
also request comment on the use of the Lifecycle Climate Performance
Model (LCCP), or alternatively, the use of an EPA simulation tool to
convert the test bench results to a change in fuel consumption and
CO2 emissions.
iii. A/C Efficiency Fuel Consumption Improvement Values in the CAFE
Program
As described in section II.F and above, EPA is proposing to use the
AC17 test as a prerequisite to generating A/C Efficiency Credits
starting in MY 2017. EPA is proposing, in coordination with NHTSA, for
the first time under its EPCA authority to allow manufacturers to use
this same test procedure to generate fuel consumption improvement
values for purposes of CAFE compliance based on the use of A/C
efficiency technologies. As described above, the CO2 credits
would be determined from a comparison of the new vehicle compared to an
older ``baseline vehicle.'' For CAFE, EPA proposes to convert the total
CO2 credits due to A/C efficiency improvements from metric
tons of CO2 to a fleetwide CAFE improvement value. The fuel
consumption improvement values are presented to give the reader some
context and explain the relationship between CO2 and fuel
consumption improvements. The fuel consumption improvement values would
be the amount of fuel consumption reduction achieved by that vehicle,
up to a maximum of 0.000563 gallons/mi fuel consumption improvement
value for cars and a 0.000586 gallons/mi fuel consumption improvement
value for trucks.\278\ If the difference between the new vehicle and
baseline results does not demonstrate the full menu-based potential of
the technology, a partial credit could still be generated. This partial
credit would be proportional to how far the difference in results was
from the expected menu-based credit (i.e., the sum of the individual
technology credits). The table below presents the proposed CAFE fuel
consumption improvement values for
[[Page 75008]]
each of the efficiency-reducing air conditioning technologies
considered in this proposal. More detail is provided on the calculation
of indirect A/C CAFE fuel consumption improvement values in chapter 5
of the joint TSD. EPA is proposing definitions of each of the
technologies in the table below which are discussed in Chapter 5 of the
draft joint TSD to ensure that the air conditioner technology used by
manufacturers seeking these values corresponds with the technology used
to derive the fuel consumption improvement values.
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\278\ Note that EPA's proposed calculation methodology in 40 CFR
600.510-12 does not use vehicle-specific fuel consumption
adjustments to determine the CAFE increase due to the various
incentives allowed under the proposed program. Instead, EPA would
convert the total CO2 credits due to each incentive
program from metric tons of CO2 to a fleetwide CAFE
improvement value. The fuel consumption values are presented to give
the reader some context and explain the relationship between
CO2 and fuel consumption improvements.
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[[Page 75009]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.070
[[Page 75010]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.071
2. Incentive for Electric Vehicles, Plug-in Hybrid Electric Vehicles,
and Fuel Cell Vehicles
a. Rationale for Temporary Regulatory Incentives for Electric Vehicles,
Plug-in Hybrid Electric Vehicles, and Fuel Cell Vehicles
EPA has identified two vehicle powertrain-fuel combinations that
have the future potential to transform the light-duty vehicle sector by
achieving near-zero greenhouse gas (GHG) emissions and oil consumption
in the longer term, but which face major near-term market barriers such
as vehicle cost, fuel cost (in the case of fuel cell vehicles), the
development of low-GHG fuel production and distribution infrastructure,
and/or consumer acceptance.
Electric vehicles (EVs) and plug-in hybrid electric
vehicles (PHEVs) which would operate exclusively or frequently on grid
electricity that could be produced from very low GHG emission
feedstocks or processes.
Fuel cell vehicles (FCVs) which would operate on hydrogen
that could be produced from very low GHG emissions feedstocks or
processes.
As in the 2012-2016 rule, EPA is proposing temporary regulatory
incentives for the commercialization of EVs, PHEVs, and FCVs. EPA
believes that these advanced technologies represent potential game-
changers with respect to control of transportation GHG emissions as
they can combine an efficient vehicle propulsion system with the
potential to use motor fuels produced from low-GHG emissions feedstocks
or from fossil feedstocks with carbon capture and sequestration. EPA
recognizes that the use of EVs, PHEVs, and FCVs in the 2017-2025
timeframe, in conjunction with the incentives, will decrease the
overall GHG emissions reductions associated with the program as the
upstream emissions associated with the generation and distribution of
electricity are higher than the upstream emissions associated with
production and distribution of gasoline. EPA accounts for this
difference in projections of the overall program's impacts and benefits
(see Section III.F).\279\
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\279\ Also see the Regulatory Impact Analysis.
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The tailpipe GHG emissions from EVs, PHEVs operated on grid
electricity, and hydrogen-fueled FCVs are zero, and traditionally the
emissions of the vehicle itself are all that EPA takes into account for
purposes of compliance with standards set under Clean Air Act section
202(a). Focusing on vehicle tailpipe emissions has not raised any
issues for criteria pollutants, as upstream emissions associated with
production and distribution of the fuel are addressed by comprehensive
regulatory programs focused on the upstream sources of those emissions.
At this time, however, there is no such comprehensive program
addressing upstream emissions of GHGs, and the upstream GHG emissions
associated with production and distribution of electricity are higher,
on a national average basis, than the corresponding upstream GHG
emissions of gasoline or other petroleum based fuels.\280\ In the
future, if there were a program to comprehensively control upstream GHG
emissions, then the zero tailpipe levels from these vehicles have the
potential to contribute to very large GHG reductions, and to transform
the transportation sector's contribution to nationwide GHG emissions
(as well as oil consumption). For a discussion of this issue in the
2012-2016 rule, see 75 FR at 25434-438.
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\280\ There is significant regional variation with upstream GHG
emissions associated with electricity production and distribution.
Based on EPA's eGRID2010 database, comprised of 26 regions, the
average powerplant GHG emissions rates per kilowatt-hour for those
regions with the highest GHG emissions rates are about 3 times
higher than those with the lowest GHG emissions rates. See http://www.epa.gov/cleanenergy/energy-resources/egrid/index.html.
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EVs and FCVs also represent some of the most significant changes in
automotive technology in the industry's history.\281\ For example, EVs
face major consumer barriers such as significantly
[[Page 75011]]
higher vehicle cost and lower range. However, EVs also have attributes
that could be attractive to some consumers: Lower and more predictable
fuel price, no need for oil changes or spark plugs, and reducing one's
personal contribution to local air pollution, climate change, and oil
dependence.\282\
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\281\ A PHEV is not such a big change since, if the owner so
chooses, it can operate on gasoline.
\282\ PHEVs and FCVs share many of these same challenges and
opportunities.
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Original equipment manufacturers currently offer two EVs and one
PHEV in the U.S. market.\283\ Deliveries of the Nissan Leaf EV, which
has a list price of about $33,000 (before tax credits) and an EPA label
range of 73 miles, began in December 2010 in selected areas, and total
sales through October 2011 are about 8000. The luxury Tesla Roadster
EV, with a list price of $109,000, has been on sale since March 2008
with cumulative sales of approximately 1500. The Chevrolet Volt PHEV,
with a list price of about $41,000 and an EPA label all-electric range
of 35 miles, has sold over 5000 vehicles since it entered the market in
December 2010 in selected markets. At this time, no original equipment
manufacturer offers FCVs to the general public except for some limited
demonstration programs.\284\ Currently, combined EV, PHEV, and FCV
sales represent about 0.1% of overall light-duty vehicle sales.
Additional models, such as the Ford Focus EV, the Mitsubishi i EV, and
the Toyota Prius PHEV, are expected to enter the U.S. market in the
next few months.
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\283\ Smart has also leased approximately 100 Smart ED vehicles
in the U.S.
\284\ For example, Honda has leased up to 200 Clarity fuel cell
vehicles in southern California (see Honda.com) and Toyota has
announced plans for a limited fuel cell vehicle introduction in 2015
(see Toyota.com).
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The agency remains optimistic about consumer acceptance of EVs,
PHEVs, and FCVs in the long run, but we believe that near-term market
acceptance is less certain. One of the most successful new automotive
powertrain technologies--conventional hybrid electric vehicles like the
Toyota Prius--illustrates the challenges involved with consumer
acceptance of new technologies, even those that do not involve vehicle
attribute tradeoffs. Even though conventional hybrids have now been on
the U.S. market for over a decade, their market share hovers around 2
to 3 percent or so \285\ even though they offer higher vehicle range
than their traditional gasoline vehicle counterparts, involve no
significant consumer tradeoffs (other than cost), and have reduced
their incremental cost to a few thousand dollars. The cost and consumer
tradeoffs associated with EVs, PHEVs, and FCVs are more significant
than those associated with conventional hybrids. Given the long
leadtimes associated with major transportation technology shifts, there
is value in promoting these potential game-changing technologies today
if we want to retain the possibility of achieving major environmental
and energy benefits in the future.
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\285\ Light-Duty Automotive Technology, Carbon Dioxide
Emissions, and Fuel Economy Trends: 1975 Through 2010, EPA-420-R-10-
023, November 2010, www.epa.gov/otaq/fetrends.htm.
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In terms of the relative relationship between tailpipe and upstream
fuel production and distribution GHG emissions, EVs, PHEVs, and FCVs
are very different than conventional gasoline vehicles. Combining
vehicle tailpipe and fuel production/distribution sources, gasoline
vehicles emit about 80 percent of these GHG emissions at the vehicle
tailpipe with the remaining 20 percent associated with ``upstream''
fuel production and distribution GHG emissions.\286\ On the other hand,
vehicles using electricity and hydrogen emit no GHG (or other
emissions) at the vehicle tailpipe, and therefore all GHG emissions
associated with powering the vehicle are due to fuel production and
distribution.\287\ Depending on how the electricity and hydrogen fuels
are produced, these fuels can have very high fuel production/
distribution GHG emissions (for example, if coal is used with no GHG
emissions control) or very low GHG emissions (for example, if renewable
processes with minimal fossil energy inputs are used, or if carbon
capture and sequestration is used). For example, as shown in the
Regulatory Impact Analysis, today's Nissan Leaf EV would have an
upstream GHG emissions value of 161 grams per mile based on national
average electricity, and a value of 89 grams per mile based on the
average electricity in California, one of the initial markets for the
Leaf.
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\286\ Fuel production and distribution GHG emissions have
received much attention because there is the potential for more
widespread commercialization of transportation fuels that have very
different GHG emissions characteristics in terms of the relative
contribution of GHG emissions from the vehicle tailpipe and those
associated with fuel production and distribution. Other GHG
emissions source categories include vehicle production, including
the raw materials used to manufacture vehicle components, and
vehicle disposal. These categories have not been included in EPA
motor vehicle emissions regulations for several reasons: These
categories are less important from an emissions inventory
perspective, they raise complex accounting questions that go well
beyond vehicle testing and fuel-cycle analysis, and in general there
are fewer differences across technologies.
\287\ The Agency notes that many other fuels currently used in
light-duty vehicles, such as diesel from conventional oil, ethanol
from corn, and compressed natural gas from conventional natural gas,
have tailpipe GHG and fuel production/distribution GHG emissions
characteristics fairly similar to that of gasoline from conventional
oil. See 75 FR at 25437. The Agency recognizes that future
transportation fuels may be produced from renewable feedstocks with
lower fuel production/distribution GHG emissions than gasoline from
oil.
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Because these upstream GHG emissions values are generally higher
than the upstream GHG emissions values associated with gasoline
vehicles, and because there is currently no national program in place
to reduce GHG emissions from electric powerplants, EPA believes it is
appropriate to consider the incremental upstream GHG emissions
associated with electricity production and distribution. But, we also
think it is appropriate to encourage the initial commercialization of
EV/PHEV/FCVs as well, in order to retain the potential for game-
changing GHG emissions and oil savings in the long term.
Accordingly, EPA proposes to provide temporary regulatory
incentives for EVs, PHEVs (when operated on electricity) and FCVs that
will be discussed in detail below. EPA recognizes that the use of EVs,
PHEVs, and FCVs in the 2017-2025 timeframe, in conjunction with the
incentives, will decrease the overall GHG emissions reductions
associated with the program as the upstream emissions associated with
the generation and distribution of electricity are higher than the
upstream emissions associated with production and distribution of
gasoline. EPA accounts for this difference in projections of the
overall program's impacts and benefits (see Section III.F). EPA
believes that the relatively minor impact on GHG emissions reductions
in the near term is justified by promoting technologies that have
significant transportation GHG emissions and oil consumption game-
changing potential in the longer run, and that also face major market
barriers in entering a market that has been dominated by gasoline
vehicle technology and infrastructure for over 100 years.
EPA will review all of the issues associated with upstream GHG
emissions, including the status of EV/PHEV/FCV commercialization, the
status of upstream GHG emissions control programs, and other relevant
factors.
b. MYs 2012-2016 Light-Duty Vehicle Greenhouse Gas Emissions Standards
The light-duty vehicle greenhouse gas emissions standards for model
years 2012-2016 provide a regulatory incentive for electric vehicles
(EVs), fuel cell vehicles (FCVs), and for the electric portion of
operation of plug-in hybrid
[[Page 75012]]
electric vehicles (PHEVs). See generally 75 FR at 25434-438. This is
designed to promote advanced technologies that have the potential to
provide ``game changing'' GHG emissions reductions in the future. This
incentive is a 0 grams per mile compliance value (i.e., a compliance
value based on measured vehicle tailpipe GHG emissions) up to a
cumulative EV/PHEV/FCV production cap threshold for individual
manufacturers. There is a two-tier cumulative EV/PHEV/FCV production
cap for MYs 2012-2016: The cap is 300,000 vehicles for those
manufacturers that sell at least 25,000 EVs/PHEVs/FCVs in MY 2012, and
the cap is 200,000 vehicles for all other manufacturers. For
manufacturers that exceed the cumulative production cap over MYs 2012-
2016, compliance values for those vehicles in excess of the cap will be
based on a full accounting of the net fuel production and distribution
GHG emissions associated with those vehicles relative to the fuel
production and distribution GHG emissions associated with comparable
gasoline vehicles. For an electric vehicle, this accounting is based on
the vehicle electricity consumption over the EPA compliance tests,
eGRID2007 national average powerplant GHG emissions factors, and
multiplicative factors to account for electricity grid transmission
losses and pre-powerplant feedstock GHG related emissions.\288\ The
accounting for a hydrogen fuel cell vehicle would be done in a
comparable manner.
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\288\ See 40 CFR 600.113-12(m).
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Although EPA also proposed a vehicle incentive multiplier for MYs
2012-2016, the agency did not finalize a multiplier. At that time, the
Agency believed that combining the 0 gram per mile and multiplier
incentives would be excessive.
The 0 grams per mile compliance value decreases the GHG emissions
reductions associated with the 2012-2016 standards compared to the same
standards and no 0 grams per mile compliance value. It is impossible to
know the precise number of vehicles that will take advantage of this
incentive in MYs 2012-2016. In the preamble to the final rule, EPA
projected the decrease in GHG emissions reductions that would be
associated with a scenario of 500,000 EVs certified with a compliance
value of 0 grams per mile. This scenario would result in a projected
decrease of 25 million metric tons of GHG emissions reductions, or less
than 3 percent of the total projected GHG benefits of the program of
962 million metric tons. This GHG emissions impact could be smaller or
larger, of course, based on the actual number of EVs that would certify
at 0 grams per mile.
In the preamble to the final rule, EPA stated that it would
reassess this issue for rulemakings beginning in MY 2017 based on the
status of advanced vehicle technology commercialization, the status of
upstream GHG control programs, and other relevant factors.
c. Supplemental Notice of Intent
In our most recent Supplemental Notice of Intent,\289\ EPA stated
that: ``EPA intends to propose an incentive multiplier for all electric
vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), and fuel cell
vehicles (FCVs) sold in MYs 2017 through 2021. This multiplier approach
means that each EV/PHEV/FCV would count as more than one vehicle in the
manufacturer's compliance calculation. EPA intends to propose that EVs
and FCVs start with a multiplier value of 2.0 in MY 2017, phasing down
to a value of 1.5 in MY 2021. PHEVs would start at a multiplier value
of 1.6 in MY 2017 and phase down to a value of 1.3 in MY 2021. These
multipliers would be proposed for incorporation in EPA's GHG program *
* *. As an additional incentive for EVs, PHEVs and FCVs, EPA intends to
propose allowing a value of 0 g/mile for the tailpipe compliance value
for EVs, PHEVs (electricity usage) and FCVs for MYs 2017-2021, with no
limit on the quantity of vehicles eligible for 0 g/mi tailpipe
emissions accounting. For MYs 2022-2025, 0 g/mi will only be allowed up
to a per-company cumulative sales cap based on significant penetration
of these advanced vehicles in the marketplace. EPA intends to propose
an appropriate cap in the NPRM.''
---------------------------------------------------------------------------
\289\ 76 Federal Register 48758 (August 9, 2011).
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d. Proposal for MYs 2017-2025
EPA is proposing the following temporary regulatory incentives for
EVs, PHEVs, and FCVs consistent with the discussion in the August 2011
Supplemental Notice of Intent.
For MYs 2017 through 2021, EPA is proposing two incentives. The
first proposed incentive is to allow all EVs, PHEVs (electric
operation), and FCVs to use a GHG emissions compliance value of 0 grams
per mile. There would be no cap on the number of vehicles eligible for
the 0 grams per mile compliance value for MYs 2017 through 2021.
The second proposed incentive for MYs 2017 through 2021 is a
multiplier for all EVs, PHEVs, and FCVs, which would allow each of
these vehicles to ``count'' as more than one vehicle in the
manufacturer's compliance calculation.\290\ While the Agency rejected a
multiplier incentive in the MYs 2012-2016 final rule, we are proposing
a multiplier for MYs 2017-2021 because, while advanced technologies
were not necessary for compliance in MYs 2012-2016, they are necessary,
for some manufacturers, to comply with the GHG standards in the MYs
2022-2025 timeframe. A multiplier for MYs 2017-2021 can also promote
the initial commercialization of these advanced technologies. In order
for a PHEV to be eligible for the multiplier incentive, EPA proposes
that PHEVs be required to be able to complete a full EPA highway test
(10.2 miles), without using any conventional fuel, or alternatively,
have a minimum equivalent all-electric range of 10.2 miles as measured
on the EPA highway cycle. EPA seeks comment on whether this minimum
range (all-electric or equivalent all-electric) should be lower or
higher, or whether the multiplier should vary based on range or on
another PHEV metric such as battery capacity or ratio of electric motor
power to engine or total vehicle power. The specific proposed
multipliers are shown in Table III-15.
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\290\ In the unlikely case where a PHEV with a low electric
range might have an overall GHG emissions compliance value that is
higher than its compliance target, EPA proposes that the automaker
can choose not to use the multiplier.
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[[Page 75013]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.072
EPA also requests comments on the merits of providing similar
multiplier incentives to dedicated and/or dual fuel compressed natural
gas vehicles.
For MYs 2022 through 2025, EPA is proposing one incentive--the 0
grams per mile GHG emissions compliance incentive for EVs, PHEVs
(electric operation), and FCVs up to a per-company cumulative
production cap threshold for those model years. EPA is proposing a two-
tier, per-company cap based on cumulative production in prior years,
consistent with the general approach that was adopted in the rulemaking
for MYs 2012-2016. For manufacturers that sell 300,000 or more EV/PHEV/
FCVs combined in MYs 2019-2021, the proposed cumulative production cap
would be 600,000 EV/PHEV/FCVs for MYs 2022-2025. Other automakers would
have a proposed cumulative production cap of 200,000 EV/PHEV/FCVs in
MYs 2022-2025.
This proposed cap design is appropriate as a way to encourage
automaker investment in potential GHG emissions game-changing
technologies that face very significant cost and consumer barriers. In
addition, as with the rulemaking for MYs 2012-2016, EPA believes it is
important to both recognize the benefit of early leadership in
commercialization of these technologies, and encourage additional
manufacturers to invest over time. Manufacturers are unlikely to do so
if vehicles with these technologies are treated for compliance purposes
to be no more advantageous than the best conventional hybrid vehicles.
Finally, we believe that the proposed cap design provides a reasonable
limit to the overall decrease in program GHG emissions reductions
associated with the incentives, and EPA is being transparent about
these GHG emissions impacts (see later in this section and also Section
III.F).
EPA recognizes that a central tension in the design of a proposed
cap relates to certainty and uncertainty with respect to both
individual automaker caps and the overall number of vehicles that may
fall under the cap, which determines the overall decrease in GHG
emissions reductions. A per-company cap as described above would
provide clear certainty for individual manufacturers at the time of the
final rule, but would yield uncertainty about how many vehicles
industry-wide would take advantage of the 0 grams per mile incentive
and therefore the overall impact on GHG emissions. An alternative
approach would be an industry-wide cap where EPA would establish a
finite limit on the total number of vehicles eligible for the 0 grams
per mile incentive, with a method for allocating this industry-wide cap
to individual automakers. An industry-wide cap would provide certainty
with respect to the maximum number of vehicles and GHG emissions impact
and would reward those automakers who show early leadership. If EPA
were to make a specific numerical allocation at the time of the final
rule, automakers would have certainty, but EPA is concerned that we may
not have sufficient information to make an equitable allocation for a
timeframe that is over a decade away. If EPA were to adopt an
allocation formula in the final rule that was dependent on future sales
(as we are proposing above for the per-company cap), automakers would
have much less certainty in compliance planning as they would not know
their individual caps until some point in the future.
To further assess the merits of an industry-wide cap approach, EPA
also seeks comment on the following alternative for an industry-wide
cap. EPA would place an industry-wide cumulative production cap of 2
million EV/PHEV/FCVs eligible for the 0 grams per mile incentive in MYs
2022-2025. EPA has chosen 2 million vehicles because, as shown below,
we project that this limits the maximum decrease in GHG emissions
reductions to about 5 percent of total program GHG savings. EPA would
allocate this 2 million vehicle cap to individual automakers in
calendar year 2022 based on cumulative EV/PHEV/FCV sales in MYs 2019-
2021, i.e., if an automaker sold X percent of industry-wide EV/PHEV/FCV
sales in MYs 2019-2021, that automaker would get X percent of the 2
million industry-wide cumulative production cap in MYs 2022-2025 (or
possibly somewhat less than X percent, if EPA were to reserve some
small volumes for those automakers that sold zero EV/PHEV/FCVs in MYs
2019-2021).
For both the proposed per-company cap and the alternative industry-
wide cap, EPA proposes that, for production beyond the cumulative
vehicle production cap for a given manufacturer in MY 2022 and later,
compliance values would be calculated according to a methodology that
accounts for the full net increase in upstream GHG emissions relative
to that of a comparable gasoline vehicle. EPA also asks for comment on
various approaches for phasing in from a 0 gram per mile value to a
full net increase value, e.g., an interim period when the compliance
value might be one-half of the net increase.
EPA also seeks comments on whether any changes should be made for
MYs 2012-2016, i.e., whether the compliance value for production beyond
the cap should be one-half of the net increase in upstream GHG
emissions, or whether the current cap for MYs 2012-2016 should be
removed.
EPA is not proposing any multiplier incentives for MYs 2022 through
2025. EPA believes that the 0 gram per mile compliance value, with
cumulative
[[Page 75014]]
vehicle production cap, is a sufficient incentive for MYs 2022-2025.
One key issue here is the appropriate electricity upstream GHG
emissions factor or rate to use in future projections of EV/PHEV
emissions based on the net upstream approach. In the following example,
we use a 2025 nationwide average electricity upstream GHG emissions
rate (powerplant plus feedstock extraction, transportation, and
processing) of 0.574 grams GHG/watt-hour, based on simulations with the
EPA Office of Atmospheric Program's Integrated Planning Model
(IPM).\291\ For the example below, EPA is using a projected national
average value from the IPM model, but EPA recognizes that values
appropriate for future vehicle use may be higher or lower than this
value. EPA is considering running the IPM model with a more robust set
of vehicle and vehicle charging-specific assumptions to generate a
better electricity upstream GHG emissions factor for EVs and PHEVs for
our final rulemaking, and, at minimum, intends to account for the
likely regional sales variation for initial EV/PHEV/FCVs, and different
scenarios for the relative frequency of daytime and nighttime charging.
EPA seeks comment on whether there are additional factors that we
should try to include in the IPM modeling for the final rulemaking.
---------------------------------------------------------------------------
\291\ Technical Support Document, Chapter 4.
---------------------------------------------------------------------------
EPA proposes a 4-step methodology for calculating the GHG emissions
compliance value for vehicle production in excess of the cumulative
production cap for an individual automaker. For example, for an EV in
MY 2025, this methodology would include the following steps and
calculations:
Measuring the vehicle electricity consumption in watt-
hours/mile over the EPA city and highway tests (for example, a midsize
EV in 2025 might have a 2-cycle test electricity consumption of 230
watt-hours/mile)
Adjusting this watt-hours/mile value upward to account for
electricity losses during electricity transmission (dividing 230 watt-
hours/mile by 0.93 to account for grid/transmission losses yields a
value of 247 watt-hours/mile)
Multiplying the adjusted watt-hours/mile value by a 2025
nationwide average electricity upstream GHG emissions rate of 0.574
grams/watt-hour at the powerplant (247 watt-hours/mile multiplied by
0.574 grams GHG/watt-hour yields 142 grams/mile)
Subtracting the upstream GHG emissions of a comparable
midsize gasoline vehicle of 39 grams/mile \292\ to reflect a full net
increase in upstream GHG emissions (142 grams/mile for the EV minus 39
grams/mile for the gasoline vehicle yields a net increase and EV
compliance value of 103 grams/mile).\293\
---------------------------------------------------------------------------
\292\ A midsize gasoline vehicle with a footprint of 46 square
feet would have a MY 2025 GHG target of about 140 grams/mile;
dividing 8887 grams CO2/gallon of gasoline by 140 grams/
mile yields an equivalent fuel economy level of 63.5 mpg; and
dividing 2478 grams upstream GHG/gallon of gasoline by 63.5 mpg
yields a midsize gasoline vehicle upstream GHG value of 39 grams/
mile. The 2478 grams upstream GHG/gallon of gasoline is calculated
from 21,546 grams upstream GHG/million Btu (EPA value for future
gasoline based on DOE's GREET model modified by EPA standards and
data; see docket memo to MY 2012-2016 rulemaking titled
``Calculation of Upstream Emissions for the GHG Vehicle Rule'') and
multiplying by 0.115 million Btu/gallon of gasoline.
\293\ Manufacturers can utilize alternate calculation
methodologies if shown to yield equivalent or superior results and
if approved in advance by the Administrator.
---------------------------------------------------------------------------
The full accounting methodology for FCVs and the portion of PHEV
operation on grid electricity would use this same approach. The
proposed regulations contain EPA's proposed method to determine the
compliance value for PHEVs, and EPA proposes to develop a similar
methodology for FCVs if and when the need arises.\294\ Given the
uncertainty about how hydrogen would be produced, if and when it were
used as a transportation fuel, EPA seeks comment on projections for the
fuel production and distribution GHG emissions associated with hydrogen
production for various feedstocks and processes.
---------------------------------------------------------------------------
\294\ 40 CFR 600.113-12(m).
---------------------------------------------------------------------------
EPA is fully accounting for the upstream GHG emissions associated
with all electricity used by EVs and PHEVs (and any hydrogen used by
FCVs), both in our regulatory projections of the impacts and benefits
of the program, and in all GHG emissions inventory accounting.
EPA seeks public comment on the proposed incentives for EVs, PHEVs,
and FCVs described above.
e. Projection of Impact on GHG Emissions Reductions Due to Incentives
EPA believes it is important to project the impact on GHG emissions
that will be associated with the proposed incentives (both 0 grams per
mile and the multiplier) for EV/PHEV/FCVs over the MYs 2017-2025
timeframe. Since it is impossible to know precisely how many EV/PHEV/
FCVs will be sold in the MYs 2017-2025 timeframe that will utilize the
proposed incentives, EPA presents projections for two scenarios: (1)
The number of EV/PHEV/FCVs that EPA's OMEGA technology and cost model
predicts based exclusively on its projections for the most cost-
effective way for the industry to meet the proposed standards, and (2)
a scenario with a greater number of EV/PHEV/FCVs, based not only on
compliance with the proposed GHG and CAFE standards, but other factors
such as the proposed cumulative production caps and manufacturer
investments. For this analysis, EPA assumes that EVs and PHEVs each
account for 50 percent of all EV/PHEV/FCVs. EPA seeks comment on
whether there are other scenarios which should be evaluated for this
purpose in the final rule.
[[Page 75015]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.073
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\295\ The number of metric tons represents the number of
additional tons that would be reduced if the standards stayed the
same and there was no 0 gram per mile compliance value.
\296\ The percentage change represents the ratio of the
cumulative decrease in GHG emissions reductions from the prior
column to the total cumulative GHG emissions reductions associated
with the proposed standards and the proposed 0 gram per mile
compliance value.
---------------------------------------------------------------------------
EPA projects that the cumulative GHG emissions savings of the
proposed MYs 2017-2025 standards, on a model year lifetime basis, is
approximately 2 billion metric tons. Table III-16 projects that the
likely decrease in cumulative GHG emissions reductions due to the EV/
PHEV/FCV incentives for MYs 2017-2025 vehicles is in the range of 80 to
110 million metric tons, or about 4 to 5 percent.
It is important to note that the above projection of the impact of
the EV/PHEV/FCV incentives on the overall program GHG emissions
reductions assumes that there would be no change to the standard even
if the EV 0 gram per mile incentive were not in effect, i.e., that EPA
would propose exactly the same standard if the 0 gram per mile
compliance value were not allowed for any EV/PHEV/FCVs. While EPA has
not analyzed such a scenario, it is clear that not allowing a 0 gram
per mile compliance value would change the technology mix and cost
projected for the proposed standard.
It is also important to note that the projected impact on GHG
emissions reductions in the above table are based on the 2025
nationwide average electricity upstream GHG emissions rate (powerplant
plus feedstock) of 0.574 grams GHG/watt-hour discussed above (based on
simulations with the EPA's Integrated Planning Model (IPM) for
powerplants in 2025, and a 1.06 factor to account for feedstock-related
GHG emissions).
EPA recognizes two factors which could significantly reduce the
electricity upstream GHG emissions factor by calendar year 2025. First,
there is a likelihood that early EV/PHEV/FCV sales will be much more
concentrated in parts of the country with lower electricity GHG
emissions rates and much less concentrated in regions with higher
electricity GHG emissions rates. This has been the case with sales of
hybrid vehicles, and is likely to be more so with EVs in particular.
Second, there is the possibility of a future comprehensive program
addressing upstream emissions of GHGs from the generation of
electricity. Other factors which could also help in this regard include
technology innovation and lower prices for some powerplant fuels such
as natural gas.
On the other hand, EPA also recognizes factors which could increase
the appropriate electricity upstream GHG emissions factor in the
future, such as a consideration of marginal electricity demand rather
than average demand and use of high-power charging. The possibility
that EVs won't displace gasoline vehicle use on a 1:1 basis (i.e.,
multi-vehicle households may use EVs for more shorter trips and fewer
longer trips, which could lead to lower overall travel for typical EVs
and higher overall travel for gasoline vehicles) could also reduce the
overall GHG emissions benefits of EVs.
EPA seeks comment on information relevant to these and other
factors which could both decrease or increase the proper electricity
upstream GHG emissions factor for calendar year 2025 modeling.
[[Page 75016]]
3. Incentives for ``Game-Changing'' Technologies Including Use of
Hybridization and Other Advanced Technologies for Full-Size Pickup
Trucks
As explained in section II. C above, the agencies recognize that
the standards under consideration for MY 2017-2025 will be challenging
for large trucks, including full size pickup trucks that are often used
for commercial purposes and have generally higher payload and towing
capabilities, and cargo volumes than other light-duty vehicles. In
Section II.C and Chapter 2 of the joint TSD, EPA and NHTSA describe how
the slope of the truck curve has been adjusted compared to the 2012-
2016 rule to reflect these disproportionate challenges. In Section
III.B, EPA describes the progression of the truck standards. In this
section, EPA describes a proposed incentive for full size pickup
trucks, proposed by EPA under both section 202 (a) of the CAA and
section 32904 (c) of EPCA, to incentivize advanced technologies on this
class of vehicles. This incentive would be in the form of credits under
the EPA GHG program, and fuel consumption improvement values
(equivalent to EPA's credits) under the CAFE program.
The agencies' goal is to incentivize the penetration into the
marketplace of ``game changing'' technologies for these pickups,
including their hybridization. For that reason, EPA is proposing
credits for manufacturers that hybridize a significant quantity of
their full size pickup trucks, or use other technologies that
significantly reduce CO2 emissions and fuel consumption.
This proposed credit would be available on a per-vehicle basis for mild
and strong HEVs, as well as for use of other technologies that
significantly improve the efficiency of the full sized pickup class. As
described in section II.F. and III.B.10, EPA, in coordination with
NHTSA, is also proposing that manufacturers be able to include ``fuel
consumption improvement values'' equivalent to EPA CO2
credits in the CAFE program. The gallon per mile values equivalent to
EPA proposed CO2 credits are also provided below, in
addition to the proposed CO2 credits.\297\ These credits and
fuel consumption improvement values provide the incentive to begin
transforming this challenged category of vehicles toward use of the
most advanced technologies.
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\297\ Note that EPA's proposed calculation methodology in 40 CFR
600.510-12 does not use vehicle-specific fuel consumption
adjustments to determine the CAFE increase due to the various
incentives allowed under the proposed program. Instead, EPA would
convert the total CO2 credits due to each incentive
program from metric tons of CO2 to a fleetwide CAFE
improvement value. The fuel consumption values are presented to give
the reader some context and explain the relationship between
CO2 and fuel consumption improvements.
---------------------------------------------------------------------------
Access to this credit is conditioned on a minimum penetration of
the technologies in a manufacturer's full size pickup truck fleet. The
proposed penetration rates can be found in Table 5-26 in the TSD. EPA
is seeking comment on these penetration rates and how they should be
applied to a manufacturer's truck fleet.
To ensure its use for only full sized pickup trucks, EPA is
proposing a specific definition for a full sized pickup truck based on
minimum bed size and minimum towing capability. The specifics of this
proposed definition can be found in Chapter 5 of the draft joint TSD
(see Section 5.3.1) and in the draft regulations at 86.1866-12(e). This
proposed definition is meant to ensure that the larger pickup trucks
which provide significant utility with respect to payload and towing
capacity as well as open beds with large cargo capacity are captured by
the definition, while smaller pickup trucks which have more limited
hauling, payload and/or towing are not covered by the proposed
definition. For this proposal, a full sized pickup truck would be
defined as meeting requirements 1 and 2, below, as well as either
requirement 3 or 4, below:
1. The vehicle must have an open cargo box with a minimum width
between the wheelhouses of 48 inches measured as the minimum lateral
distance between the limiting interferences (pass-through) of the
wheelhouses. The measurement would exclude the transitional arc, local
protrusions, and depressions or pockets, if present.\298\ An open cargo
box means a vehicle where the cargo bed does not have a permanent roof
or cover. Vehicles sold with detachable covers are considered ``open''
for the purposes of these criteria.
---------------------------------------------------------------------------
\298\ This dimension is also known as dimension W202 as defined
in Society of Automotive Engineers Procedure J1100.
---------------------------------------------------------------------------
2. Minimum open cargo box length of 60 inches defined by the lesser
of the pickup bed length at the top of the body (defined as the
longitudinal distance from the inside front of the pickup bed to the
inside of the closed endgate; this would be measured at the height of
the top of the open pickup bed along vehicle centerline and the pickup
bed length at the floor) and the pickup bed length at the floor
(defined as the longitudinal distance from the inside front of the
pickup bed to the inside of the closed endgate; this would be measured
at the cargo floor surface along vehicle centerline).\299\
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\299\ The pickup body length at the top of the body is also
known as dimension L506 in Society of Automotive Engineers Procedure
J1100. The pickup body length at the floor is also known as
dimension L505 in Society of Automotive Engineers Procedure J1100.
---------------------------------------------------------------------------
3. Minimum Towing Capability--the vehicle must have a GCWR (gross
combined weight rating) minus GVWR (gross vehicle weight rating) value
of at least 5,000 pounds.\300\
---------------------------------------------------------------------------
\300\ Gross combined weight rating means the value specified by
the vehicle manufacturer as the maximum weight of a loaded vehicle
and trailer, consistent with good engineering judgment. Gross
vehicle weight rating means the value specified by the vehicle
manufacturer as the maximum design loaded weight of a single
vehicle, consistent with good engineering judgment. Curb weight is
defined in 40 CFR 86.1803, consistent with the provisions of 40 CFR
1037.140.
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4. Minimum Payload Capability--the vehicle must have a GVWR (gross
vehicle weight rating) minus curb weight value of at least 1,700
pounds.
As discussed above, this proposed definition is intend to cover the
larger pickup trucks sold in the U.S. today (and for 2017 and later)
which have the unique attributes of an open bed, and larger towing and/
or payload capacity. This proposed incentive will encourage the
penetration of advanced, low CO2 technologies into this
market segment. The proposed definition would exclude a number of
smaller-size pickup trucks sold in the U.S. today (examples are the
Dodge Dakota, Nissan Frontier, Chevrolet Colorado, Toyota Tacoma and
Ford Ranger). These vehicles generally have smaller boxes (and thus
smaller cargo capacity), and lower payload and towing ratings. EPA is
aware that some configurations of these smaller pickups trucks can
offer towing capacity similar to the larger pickups. As discussed in
the draft Joint TSD Section 5.3.1, EPA is seeking comment on expanding
the scope of this credit to somewhat smaller pickups (with a minimum
distance between the wheel wells of 42 inches, but still with a minimum
box length of 60 inches), provided they have the towing capabilities of
the larger full-size trucks (for example a minimum towing capacity of
6,000 pounds). EPA believes this could incentivize advanced
technologies (such as HEVs) on pickups which offer some of the utility
of the larger vehicles, but overall have lower CO2 emissions
due to the much lighter mass of the vehicle. Providing an advanced
technology incentive credit for a vehicle which offers consumers much
of the utility of a larger pickup truck but with overall lower
CO2 performance would promote the overall objective of the
proposed standards.
[[Page 75017]]
EPA proposes that mild HEV pickup trucks would be eligible for a
per-truck 10 g/mi CO2 credit (equal to 0.0011 gal/mi for a
25 mpg truck) during MYs 2017-2021 if the mild HEV technology is used
on a minimum percentage of a company's full sized pickups. That minimum
percentage would be 30 percent of a company's full sized pickup
production in MY 2017 with a ramp up to at least 80 percent of
production in MY 2021.
EPA is also proposing that strong HEV pickup trucks would be
eligible for a per-truck 20 g/mi CO2 credit (equal to 0.0023
gal/mi for a 25 mpg truck) during MYs 2017-2025 if the strong HEV
technology is used on a minimum percentage of a company's full sized
pickups. That minimum percentage would be 10 percent of a company's
full sized pickup production in each year over the model years 2017-
2025.
To ensure that the hybridization technology used by manufacturers
seeking one of these credits meets the intent behind the incentives,
EPA is proposing very specific definitions of what qualifies as a mild
and a strong HEV for these purposes. These definitions are described in
detail in Chapter 5 of the draft joint TSD (see section 5.3.3).
Because there are other technologies besides mild and strong
hybrids which can significantly reduce GHG emissions and fuel
consumption in pickup trucks, EPA is also proposing performance-based
incentive credits, and equivalent fuel consumption improvement values
for CAFE, for full size pickup trucks that achieve an emission level
significantly below the applicable CO2 target.\301\ EPA
proposes that this credit be either 10 g/mi CO2 (equivalent
to 0.0011 gal/mi for the CAFE program) or 20 g/mi CO2
(equivalent to 0.0023 gal/mi for the CAFE program) for pickups
achieving 15 percent or 20 percent, respectively, better CO2
than their footprint based target in a given model year. Because the
footprint target curve has been adjusted to account for A/C related
credits, the CO2 level to be compared with the target would
also include any A/C related credits generated by the vehicles. EPA
provides further details on this performance-based incentive in Chapter
5 of the draft joint TSD (see Section 5.3). The 10 g/mi (equivalent to
0.0011 gal/mi) performance-based credit would be available for MYs 2017
to 2021 and a vehicle meeting the requirements would receive the credit
until MY 2021 unless its CO2 level or fuel consumption
increases. The 10 g/mi credit is not available after 2021 because the
post-2021 standards quickly overtake a 15% overcompliance. Earlier in
the program, an overcompliance lasts for more years, making the credit/
value appropriate for a longer period. The 20 g/mi CO2
(equivalent to 0.0023 gal/mi) performance-based credit would be
available for a maximum of 5 consecutive years within the model years
of 2017 to 2025 after it is first eligible, provided its CO2
level and fuel consumption does not increase. Subsequent redesigns can
qualify for the credit again. The credits would begin in the model year
of introduction, and (as noted) could not extend past MY 2021 for the
10 g/mi credit (equivalent to 0.0011 gal/mi) and MY 2025 for the 20 g/
mi credit (equivalent to 0.0023 gal/mi).
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\301\ The 15 and 20 percent thresholds would be based on
CO2 performance compared to the applicable CO2
vehicle footprint target for both CO2 credits and
corresponding CAFE fuel consumption improvement values. As with A/C
and off-cycle credits, EPA would convert the total CO2
credits due to the pick-up incentive program from metric tons of
CO2 to a fleetwide equivalent CAFE improvement value.
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As with the HEV-based credit, the performance-based credit/value
requires that the technology be used on a minimum percentage of a
manufacturer's full-size pickup trucks. That minimum percentage for the
10 g/mi GHG credit (equivalent to 0.0011 gal/mi fuel consumption
improvement value) would be 15 percent of a company's full sized pickup
production in MY 2017 with a ramp up to at least 40 percent of
production in MY 2021. The minimum percentage for the 20 g/mi credit
(equivalent to 0.0011 gal/mi fuel consumption improvement value) would
be 10 percent of a company's full sized pickup production in each year
over the model years 2017-2025. These minimum percentages are set to
encourage significant penetration of these technologies, leading to
long-term market acceptance.
Importantly, the same vehicle could not receive credits (or
equivalent fuel consumption improvement values) under both the HEV and
the performance-based approaches. EPA requests comment on all aspects
of this proposed pickup truck incentive credit, including the proposed
definitions for full sized pickup truck and mild and strong HEV.
4. Treatment of Plug-in Hybrid Electric Vehicles, Dual Fuel Compressed
Natural Gas Vehicles, and Ethanol Flexible Fuel Vehicles for GHG
Emissions Compliance
a. Greenhouse Gas Emissions
i. Introduction
This section addresses proposed approaches for determining the
compliance values for greenhouse gas (GHG) emissions for those vehicles
that can use two different fuels, typically referred to as dual fuel
vehicles under the CAFE program. Three specific technologies are
addressed: Plug-in hybrid electric vehicles (PHEVs), dual fuel
compressed natural gas (CNG) vehicles, and ethanol flexible fuel
vehicles (FFVs).\302\ EPA's underlying principle is to base compliance
values on demonstrated vehicle tailpipe CO2 emissions
performance. The key issue with vehicles that can use more than one
fuel is how to weight the operation (and therefore GHG emissions
performance) on the two different fuels. EPA proposes to do this on a
technology-by-technology basis, and the sections below will explain the
rationale for choosing a particular approach for each vehicle
technology.
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\302\ EPA recognizes that other vehicle technologies may be
introduced in the future that can use two (or more) fuels. For
example, the original FFVs were designed for up to 85% methanol/15%
gasoline, rather than the 85% ethanol/15% gasoline for which current
FFVs are designed. EPA has regulations that address methanol
vehicles (both FFVs and dedicated vehicles), and, for GHG emissions
compliance in MYs 2017-2025, EPA is proposing to treat methanol
vehicles in the same way as ethanol vehicles.
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EPA is proposing no changes to the tailpipe GHG emissions
compliance approach for dedicated vehicles, i.e., those vehicles that
can use only one fuel. As finalized for MY 2016 and later vehicles in
the 2012-2016 rule, tailpipe CO2 emissions compliance levels
are those values measured over the EPA 2-cycle city/highway tests.\303\
EPA is proposing provisions for how and when to also account for the
upstream fuel production and distribution related GHG emissions
associated with electric vehicles, fuel cell vehicles, and the electric
portion of plug-in hybrid electric vehicles, and these provisions are
discussed in Section III.C.2 above.
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\303\ For dedicated alternative fuel vehicles. See 75 at FR
25434.
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ii. Plug-In Hybrid Electric Vehicles
PHEVs can operate both on an on-board battery that can be charged
by wall electricity from the grid, and on a conventional liquid fuel
such as gasoline. Depending on how these vehicles are fueled and
operated, PHEVs
[[Page 75018]]
could operate exclusively on grid electricity, exclusively on the
conventional fuel, or any combination of both fuels. EPA can determine
the CO2 emissions performance when operated on the battery
and on the conventional fuel. But, in order to generate a single
CO2 emissions compliance value, EPA must adopt an approach
for determining the appropriate weighting of the CO2
emissions performance on grid electricity and the CO2
emissions performance on gasoline.
EPA is proposing no changes to the Society of Automotive Engineers
(SAE) cycle-specific utility factor approach for PHEV compliance and
label emissions calculations first adopted by EPA in the joint EPA/DOT
final rulemaking establishing new fuel economy and environment label
requirements for MY 2013 and later vehicles.\304\ This utility factor
approach is based on several key assumptions. One, PHEVs are designed
such that the first mode of operation is all-electric drive or electric
assist. Every PHEV design with which EPA is familiar is consistent with
this assumption. Two, PHEVs will be charged once per day. While this
critical assumption is unlikely to be met by every PHEV driver every
day, EPA believes that a large majority of PHEV owners will be highly
motivated to re-charge as frequently as possible, both because the
owner has paid a considerably higher initial vehicle cost to be able to
operate on grid electricity, and because electricity is considerably
cheaper, on a per mile basis, than gasoline. Three, it is reasonable to
assume that future PHEV drivers will retain driving profiles similar to
those of past drivers on which the utility factors were based. More
detailed information on the development of this utility factor approach
can be obtained from the Society of Automotive Engineers.\305\ EPA will
continue to reevaluate the appropriateness of these assumptions over
time.
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\304\ 76 FR 39504-39505 (July 6, 2011) and 40 CFR 600.116-12(b).
\305\ http://www.SAE.org, specifically SAE J2841 ``Utility
Factor Definitions for Plug-In Hybrid Electric Vehicles Using Travel
Survey Data,'' September 2010.
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Based on this approach, and PHEV-specific specifications such as
all-electric drive or equivalent all-electric range, the cycle-specific
utility factor methodology yields PHEV-specific values for projected
average percent of operation on grid electricity and average percent of
operation on gasoline over both the city and highway test cycles. For
example, the Chevrolet Volt PHEV, the only original equipment
manufacturer (OEM) PHEV in the U.S. market today, which has an all-
electric range of 35 miles on EPA's fuel economy label, has city and
highway cycle utility factors of about 0.65, meaning that the average
Volt driver is projected to drive about 65 percent of the miles on grid
electricity and about 35 percent of the miles on gasoline. Each PHEV
will have its own utility factor.
Based on this utility factor approach, EPA calculates the GHG
emissions compliance value for an individual PHEV as the sum of (1) the
GHG emissions value for electric operation (either 0 grams per mile or
a non-zero value reflecting the net upstream GHG emissions accounting
depending on whether automaker EV/PHEV/FCV production is below or above
its cumulative production cap as discussed in Section III.C.2 above)
multiplied by the utility factor, and (2) the tailpipe CO2
emissions value on gasoline multiplied by (1 minus the utility factor).
iii. Dual Fuel Compressed Natural Gas Vehicles
Dual fuel CNG vehicles operate on either compressed natural gas or
gasoline, but not both at the same time, and have separate tanks for
the two fuels.\306\ There are no OEM dual fuel CNG vehicles in the U.S.
market today, but some manufacturers have expressed interest in
bringing them to market during the rulemaking time frame. Under current
EPA regulations through MY 2015, GHG emissions compliance values for
dual fuel CNG vehicles are based on a methodology that provides
significant GHG emissions incentives equivalent to the ``CAFE credit''
approach for dual and flexible fuel vehicles. For MY 2016, current EPA
regulations utilize a methodology based on demonstrated vehicle
emissions performance and real world fuels usage, similar to that for
ethanol flexible fuel vehicles discussed below.
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\306\ EPA considers ``bi-fuel'' CNG vehicles to be those
vehicles that can operate on a mixture of CNG and gasoline. Bi-fuel
vehicles would not be eligible for this treatment, since they are
not designed to allow the use of CNG only.
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EPA proposes to develop a new approach for dual fuel CNG vehicle
GHG emissions compliance that is very similar to the utility factor
approach developed and described above for PHEVs, and for this new
approach to take effect with MY 2016. As with PHEVs, EPA believes that
owners of dual fuel CNG vehicles will preferentially seek to refuel and
operate on CNG fuel as much as possible, both because the owner paid a
much higher price for the dual fuel capability, and because CNG fuel is
considerably cheaper than gasoline on a per mile basis. EPA notes that
there are some relevant differences between dual fuel CNG vehicles and
PHEVs, and some of these differences might weaken the case for using
utility factors for dual fuel CNG vehicles. For example, a dual fuel
CNG vehicle might be able to run on gasoline when both fuels are
available on board (depending on how the vehicle is designed), it may
be much more inconvenient for some private dual fuel CNG vehicle owners
to fuel every day relative to PHEVs, and there are many fewer CNG
refueling stations than electrical charging facilities.\307\ On the
other hand, there are differences that could strengthen the case as
well, e.g., many dual fuel CNG vehicles will likely have smaller
gasoline tanks given the expectation that gasoline will be used only as
an ``emergency'' fuel, and it may be easier for a dual fuel CNG vehicle
to be refueled during the day than a PHEV (which is most conveniently
refueled at night with a home charging unit).
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\307\ EPA assumes that most PHEV owners will charge at home with
electrical charging equipment that they purchase and install for
their own use.
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Taking all these considerations into account, EPA believes that the
merit of using a utility factor-based approach for dual fuel CNG
vehicles is similar to that of doing so for PHEVs, and we propose to
develop a similar methodology for dual fuel CNG vehicles. For example,
applying the current SAE fleet utility factor approach developed for
PHEVs to a dual fuel CNG vehicle with a 150-mile CNG range would result
in a compliance assumption of about 95 percent operation on CNG and
about 5 percent operation on gasoline.\308\ EPA is proposing to
directly extend the PHEV utility factor methodology to dual fuel CNG
vehicles, using the same assumptions about daily refueling. EPA invites
comment on this proposal, including the appropriateness of the
assumptions described above for dual fuel CNG vehicles.
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\308\ See SAE J2841 ``Utility Factor Definitions for Plug-In
Hybrid Electric Vehicles Using Travel Survey Data,'' September 2010,
available at http://www.SAE.org, which we are proposing to use for
dual fuel CNG vehicles as well.
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Further, for MYs 2012-2015, EPA is also proposing to allow the
option, at the manufacturer's discretion, to use the proposed utility
factor-based methodology for MYs 2016-2025 discussed above. The
rationale for providing this option is that some manufacturers are
likely to reach the maximum allowable GHG emissions credits (based on
the statutory CAFE credits) through their production of
[[Page 75019]]
ethanol FFVs, and therefore would not be able to gain any GHG emissions
compliance benefit even if they produced dual fuel CNG vehicles that
demonstrated superior GHG emissions performance.
In determining eligibility for the utility factor approach, EPA may
consider placing additional constraints on the designs of dual fuel CNG
vehicles to maximize the likelihood that consumers will routinely seek
to use CNG fuel. Options include, but are not limited to, placing a
minimum value on CNG tank size or CNG range, a maximum value on
gasoline tank size or gasoline range, a minimum ratio of CNG-to-
gasoline range, and requiring an onboard control system so that a dual
fuel CNG vehicle is only able to access the gasoline fuel tank if the
CNG tank is empty. EPA seeks comments on the merits of these additional
eligibility constraints for dual fuel CNG vehicles.
iv. Ethanol Flexible Fuel Vehicles
Ethanol FFVs can operate on E85 (a blend of 15 percent gasoline and
85 percent ethanol, by volume), gasoline, or any blend of the two.
There are many ethanol FFVs in the market today.
In the final rulemaking for MY 2012-2016, EPA promulgated
regulations for MYs 2012-2015 ethanol FFVs that provided significant
GHG emissions incentives equivalent to the long-standing ``CAFE
credits'' for ethanol FFVs under EPCA, since many manufacturers had
relied on the availability of these credits in developing their
compliance strategies.\309\ Beginning in MY 2016, EPA ended the GHG
emissions compliance incentives and adopted a methodology based on
demonstrated vehicle emissions performance. This methodology
established a default value assumption where ethanol FFVs are operated
100 percent of the time on gasoline, but allows manufacturers to use a
relative E85 and gasoline vehicle emissions performance weighting based
either on national average E85 and gasoline sales data, or
manufacturer-specific data showing the percentage of miles that are
driven on E85 vis-[agrave]-vis gasoline for that manufacturer's ethanol
FFVs.\310\ EPA is not proposing any changes to this methodology for MYs
2017-2025.
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\309\ 75 FR at 25432-433.
\310\ 75 FR at 25433-434.
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EPA believes there is a compelling rationale for not adopting a
utility factor-based approach, as discussed above for PHEVs and dual
fuel CNG vehicles, for ethanol FFVs. Unlike with PHEVs and dual fuel
CNG vehicles, owners of ethanol FFVs do not pay any more for the E85
fueling capability. Unlike with PHEVs and dual fuel CNG vehicles,
operation on E85 is not cheaper than gasoline on a per mile basis, it
is typically the same or somewhat more expensive to operate on E85.
Accordingly, there is no direct economic motivation for the owner of
ethanol FFVs to seek E85 refueling, and in some cases there is an
economic disincentive. Because E85 has a lower energy content per
gallon than gasoline, an ethanol FFV will have a lower range on E85
than on gasoline, which provides an additional disincentive. The data
confirm that, on a national average basis in 2008, less than one
percent of ethanol FFVs used E85 fuel.\311\
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\311\ 75 FR 14762 (March 26, 2010).
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If, in the future, this situation were to change (e.g., if E85 were
less expensive, on a per mile basis), then EPA could reconsider its
approach to this issue.
b. Procedures for CAFE Calculations for MY 2020 and Later
49 U.S.C. 32905 specifies how the fuel economy of dual fuel
vehicles is to be calculated for the purposes of CAFE through the 2019
model year. The basic calculation is a 50/50 harmonic average of the
fuel economy for the alternative fuel and the conventional fuel,
irrespective of the actual usage of each fuel. In addition, the fuel
economy value for the alternative fuel is significantly increased by
dividing by 0.15 in the case of CNG and ethanol and by using a
petroleum equivalency factor methodology that yields a similar overall
increase in the CAFE mpg value for electricity.\312\ In a related
provision, 49 U.S.C. 32906, the amount by which a manufacturer's CAFE
value (for domestic passenger cars, import passenger cars, or light-
duty trucks) can be improved by the statutory incentive for dual fuel
vehicles is limited by EPCA to 1.2 mpg through 2014, and then gradually
reduced until it is phased out entirely starting in model year
2020.\313\ With the expiration of the special calculation procedures in
49 U.S.C. 32905 for dual fueled vehicles, the CAFE calculation
procedures for model years 2020 and later vehicles need to be set under
the general provisions authorizing EPA to establish testing and
calculation procedures.\314\
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\312\ 49 U.S.C. 32905.
\313\ 49 U.S.C. 32906. NHTSA interprets section 32906(a) as not
limiting the impact of duel fueled vehicles on CAFE calculations
after MY2019.
\314\ 49 U.S.C. 32904(a), (c).
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With the expiration of the specific procedures for dual fueled
vehicles, there is less need to base the procedures on whether a
vehicle meets the specific definition of a dual fueled vehicle in EPCA.
Instead, EPA's focus is on establishing appropriate procedures for the
broad range of vehicles that can use both alternative and conventional
fuels. For convenience, this discussion uses the term dual fuel to
refer to vehicles that can operate on an alternative fuel and on a
conventional fuel.
EPA sees two potential approaches for dual fuel vehicle CAFE
calculations for model years 2020 and later. EPA requests comment on
the two options discussed here, and we welcome comments on other
potential options as well.
Determining the fuel economy of the vehicle for purposes of CAFE
requires a determination on how to weight the fuel economy performance
on the alternative fuel and the fuel economy performance on the
conventional fuel. For PHEVs, dual-fuel CNG vehicles, and FFVs, EPA
proposes to apply the same weighting for CAFE purposes as for purposes
of GHG emissions compliance values. EPA proposes that, for PHEVs and
dual-fuel CNG vehicles, the fuel economy weightings will be determined
using the SAE utility factor methodology, while for ethanol FFVs,
manufacturers can choose to use a default based on 100% gasoline
operation, or can choose to base the fuel economy weightings on
national average E85 and gasoline use, or on manufacturer-specific data
showing the percentage of miles that are driven on E85 vis-[agrave]-vis
gasoline for that manufacturer's ethanol FFVs. Where the two options
differ is whether the 0.15 divisor or similar adjustment factor is
retained or not. EPA believes that there are legitimate arguments both
for and against retaining the adjustment factors.
EPA proposes to continue to use the 0.15 divisor for CNG and
ethanol, and the petroleum equivalency factor for electricity, both of
which the statute requires to be used through 2019, for model years
2020 and later. EPA believes there are two primary arguments for
retaining the 0.15 divisor and petroleum equivalency factor. One, this
approach is directionally consistent with the overall petroleum
reduction goals of EPCA and the CAFE program, because it continues to
encourage manufacturers to build vehicles capable of operating on fuels
other than petroleum. Two, the 0.15 divisor and petroleum equivalency
factor are used under EPCA to calculate CAFE compliance values for
dedicated alternative fuel vehicles, and retaining this approach for
dual fuel vehicles would maintain consistency, for MY 2020 and later,
between the approaches for dedicated alternative fuel vehicles and for
the alternative fuel portion of
[[Page 75020]]
dual fuel vehicle operation. Opting not to provide the 0.15 divisor or
PEF for the alternative fuel portion of these vehicles' operation may
discourage manufacturers from building vehicles capable of operating on
both gasoline/diesel and alternative fuels, and thus potentially
discourage important ``bridge'' technologies that may help consumers
overcome current concerns about advanced technology vehicles.
EPA recognizes that this proposed calculation procedure would
continue to provide, directionally, an increase in fuel economy values
for the vehicles previously covered by the special calculation
procedures in 49 U.S.C. 32905, and that Congress chose both to end the
specific calculation procedures in that section and over time to reduce
the benefit for CAFE purposes of the increase in fuel economy mandated
by those special calculation procedures. However, the proposed
provisions differ significantly in important ways from the special
calculation provisions mandated by EPCA. Most importantly, they are
changed to reflect actual usage rates of the alternative fuel and do
not use the artificial 50/50 weighting previously mandated by 49 U.S.C.
32905. In practice this means the primary vehicles to benefit from the
proposed provision will be PHEVs and dual-fuel CNG vehicles, and not
FFVs, while the primary source of benefit to manufacturers under the
statutory provisions came from FFVs. Changing the weighting to better
reflect real world usage is a major change from that mandated by 49
U.S.C. 32905, and it orients the calculation procedure more to the real
world impact on petroleum usage, consistent with the statute's
overarching purpose of energy conservation. In addition, as noted
above, Congress clearly continued the calculation procedures for
dedicated alternative fuel vehicles that result in increased fuel
economy values. This proposed approach is consistent with this, as it
uses the same approach for calculating fuel economy on the alternative
fuel when there is real world usage of the alternative fuel. Since the
proposed provisions are quite different in effect from the specified
provisions in 49 U.S.C. 32905, and are consistent with the calculation
procures for dedicated vehicles that use the same alternative fuel, EPA
believes this proposal would be an appropriate exercise of discretion
under the general authority provided in 49 U.S.C. 32904.
An alternative option to the above proposal, and about which EPA
seeks comment, is to not adopt the 0.15 divisor and petroleum
equivalency factor for model years 2020 and later. The fuel economy for
the CNG portion of a dual fuel CNG vehicle, E85 portion of FFVs, and
the electric portion of a PHEV would be determined strictly on an
energy-equivalent basis, without any adjustment based on the 0.15
divisor or petroleum equivalency factor. For E85 FFVs, the manufacturer
would almost certainly use the gasoline fuel economy value only because
gasoline has higher energy content and fuel economy than E85.\315\ This
approach would place less emphasis on conservation of petroleum and
more on conservation of energy for dual fuel vehicles. It would also
place more emphasis on Congress' decision to reduce over time the
impact on CAFE from the increased fuel economy values derived from the
specified calculation procedures in 49 U.S.C. 32905, and less emphasis
on aligning the incentives for dual fuel alternative fuel vehicles with
the incentives for dedicated alternative fuel vehicles.\316\ EPA
invites comment on both approaches.
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\315\ Manufacturers can also choose to base the fuel economy
weightings on national average E85 and gasoline use, or on
manufacturer-specific data showing the percentage of miles that are
driven on E85 vis-[agrave]-vis gasoline for that manufacturer's
ethanol FFVs, but since E85 fuel economy ratings are based on miles
per gallon of E85, not adjusted for energy equivalency with
gasoline, E85 mpg values are lower than gasoline mpg values, which
makes this a non-option.
\316\ Incentives for dedicated alternative fuel vehicles would
not be affected by changes to incentives for dual fueled vehicles.
Dedicated alternative fuel vehicles would continue to use the 0.15
divisor or petroleum equivalency factor.
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5. Off-Cycle Technology Credits
For MYs 2012-2016, EPA provided an option for manufacturers to
generate credits for employing new and innovative technologies that
achieve CO2 reductions which are not reflected on current 2-
cycle test procedures. For this proposal, EPA, in coordination with
NHTSA, is proposing to apply the off-cycle credits and equivalent fuel
consumption improvement values to both the GHG and CAFE programs. This
proposed expansion is a change from the 2012-16 final rule where EPA
only provided the off-cycle credits for the GHG program. For MY 2017
and later, EPA is proposing that manufacturers may continue to use off-
cycle credits for GHG compliance and begin to use fuel consumption
improvement values (essentially equivalent to EPA credits) for CAFE
compliance. In addition, EPA is proposing a set of defined (e.g.
default) values for identified off-cycle technologies that would apply
unless the manufacturer demonstrates to EPA that a different value for
its technologies is appropriate. The proposed changes to incorporate
off-cycle technologies for the GHG program are described in Section
III.C.5.a-b below, and for the CAFE program are described in Section
III.C.5.c below.
a. Off-Cycle Credit Program Adopted in MY 2012-2016 Rule
In the MY 2012-2016 Final Rule, EPA adopted an optional credit
opportunity for new and innovative technologies that reduce vehicle
CO2 emissions, but for which the CO2 reduction
benefits are not significantly captured over the 2-cycle test procedure
used to determine compliance with the fleet average standards (i.e.,
``off-cycle'').\317\ EPA indicated that eligible innovative
technologies are those that may be relatively newly introduced in one
or more vehicle models, but that are not yet implemented in widespread
use in the light-duty fleet, and which provide novel approaches to
reducing greenhouse gas emissions. The technologies must have
verifiable and demonstrable real-world GHG reductions.\318\ EPA adopted
the off-cycle credit option to provide an incentive to encourage the
introduction of these types of technologies, believing that bona fide
reductions from these technologies should be considered in determining
a manufacturer's fleet average, and that a credit mechanism is an
effective way to do this. This optional credit opportunity is currently
available through the 2016 model year.
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\317\ 75 FR 25438-440,
\318\ See 40 CFR 1866.12 (d); 75 FR at 25438.
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EPA finalized a two-tiered process for OEMs to demonstrate that
CO2 reductions of an innovative and novel technology are
verifiable and measureable but are not captured by the 2-cycle test
procedures. First, a manufacturer must determine whether the benefit of
the technology could be captured using the 5-cycle methodology
currently used to determine fuel economy label values. EPA established
the 5-cycle test methods to better represent real-world factors
impacting fuel economy, including higher speeds and more aggressive
driving, colder temperature operation, and the use of air conditioning.
If this determination is affirmative, the manufacture must follow the
5-cycle procedures.
If the manufacturer finds that the technology is such that the
benefit is not adequately captured using the 5-cycle approach, then the
manufacturer would have to develop a robust methodology, subject to EPA
approval, to demonstrate the benefit and determine the appropriate
CO2 gram per mile credit. This case-by-case, non-5-cycle
credits approach includes an opportunity for public comment as part of
the approval
[[Page 75021]]
process. The demonstration program must be robust, verifiable, and
capable of demonstrating the real-world emissions benefit of the
technology with strong statistical significance. Whether the approach
involves on-road testing, modeling, or some other analytical approach,
the manufacturer is required to present a proposed methodology to EPA.
EPA will approve the methodology and credits only if certain criteria
are met. Baseline emissions and control emissions must be clearly
demonstrated over a wide range of real world driving conditions and
over a sufficient number of vehicles to address issues of uncertainty
with the data. Data must be on a vehicle model-specific basis unless a
manufacturer demonstrated model specific data was not necessary. See
generally 75 FR at 25438-40.
b. Proposed Changes to the Off-cycle Credits Program
EPA has been encouraged by automakers' interest in off-cycle
credits since the program was finalized. Though it is early in the
program, several manufacturers have shown interest in introducing off-
cycle technologies which are in various stages of development and
testing. EPA believes that continuing the option for off-cycle credits
would further encourage innovative strategies for reducing
CO2 emissions beyond those measured by the 2-cycle test
procedures. Continuing the program provides manufacturers with
additional flexibility in reducing CO2 to meet increasingly
stringent CO2 standards and to encourage early penetration
of off-cycle technologies into the light duty fleet. Furthermore,
extending the program may encourage automakers to invest in off-cycle
technologies that could have the benefit of realizing additional
reductions in the light-duty fleet over the longer-term. Therefore, EPA
is proposing to extend the off-cycle credits program to 2017 and later
model years.
In implementing the program, some manufacturers have expressed
concern that a drawback to using the program is uncertainty over which
technologies may be eligible for off-cycle credits plus uncertainties
resulting from a case-by-case approval process. Current EPA eligibility
criteria require technologies to be new, innovative, and not in
widespread use in order to qualify for credits. Also, the MY 2012-2016
Final Rule specified that technologies must not be significantly
measurable on the 2-cycle test procedures. As discussed below, EPA
proposes to significantly modify the eligibility criteria, as the
current criteria are not well defined and have been a source of
uncertainty for manufacturers, thereby interfering with the goal of
providing an incentive for the development and use of additional
technologies to achieve real world reductions in CO2
emissions. The focus will be on whether or not add-on technologies can
be demonstrated to provide off-cycle CO2 emissions
reductions that are not sufficiently reflected on the 2-cycle tests.
In addition, as described below in section III.C.5.b.i, EPA is
proposing that manufacturers would be able to generate credits by
applying technologies listed on an EPA pre-defined and pre-approved
technology list starting with MY 2017. These credits would be verified
and approved as part of certification with no prior approval process
needed. We believe this new option would significantly streamline and
simplify the program for manufacturers choosing to use it and would
provide manufacturers with certainty that credits may be generated
through the use of pre-approved technologies. For credits not based on
the pre-defined list, EPA is proposing to streamline and better define
a step-by-step process for demonstrating emissions reductions and
applying for credits. EPA is proposing that these procedural changes to
the case-by-case approach would be effective for new credit
applications for both the remaining years of the MY 2012-2016 program
as well as for MY 2017 and later credits that are not based on the pre-
defined list.
As discussed in section II.F and III.B.10, EPA, in coordination
with NHTSA, is also proposing that manufacturers be able to include
fuel consumption reductions resulting from the use of off-cycle
technologies in their CAFE compliance calculations. Manufacturers would
generate ``fuel consumption improvement values'' essentially equivalent
to EPA credits, for use in the CAFE program. The proposed changes to
the CAFE program to incorporate off-cycle technologies are discussed
below in section III.5.c.
i. Pre-Defined Credit List for MY 2017 and Later
As noted above, EPA proposes to establish a list of off-cycle
technologies from which manufacturers could select to earn a pre-
defined level of CO2 credits in MY 2017 and later. Both
technologies and credit values based on the list would be pre-approved.
The manufacturer would demonstrate in the certification process that
their technology meets the definition of the technology in the list.
Table III-17 provides an initial proposed list of the technologies and
per vehicle credit levels for cars and light trucks. EPA has used a
combination of available activity data from the MOVES model, vehicle
and test data, and EPA's vehicle simulation tool to estimate a proposed
credit value EPA believes to be appropriate. In particular, this
vehicle simulation tool was used to determine the credit amount for
electrical load reduction technologies (e.g. high efficiency exterior
lighting, engine heat reconvery, and solar roof panels) and active
aerodynamic improvements. Chapter 5 of the joint TSD provides a
detailed description of how these technologies are defined and how the
proposed credits levels were derived.
[[Page 75022]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.074
Two technologies on the list--active aerodynamic improvements and
stop start--are in a different category than the other technologies on
the list. Both of these technologies are included in the agencies'
modeling analysis of technologies projected to be available for use in
achieving the reductions needed for the standards. We have information
on their effectiveness, cost, and availability for purposes of
considering them along with the various other technologies we consider
in determining the appropriate CO2 emissions standard. These
technologies are among those listed in Chapter 3 of the joint TSD and
have measureable benefit on the 2-cycle test. However in the context of
off-cycle credits, stop start is any technology which enables a vehicle
to automatically turn off the engine when the vehicle comes to a rest
and restart the engine when the driver applies pressure to the
accelerator or releases the brake. This includes HEVs and PHEVs (but
not EVs). In addition, active grill shutters is just one of various
technologies that can be used as part of aerodynamic design
improvements (as part of the ``aero2'' technology). The modeling and
other analysis developed for determining the appropriate emissions
standard includes these technologies, using the effectiveness values on
the 2-cycle test. This is consistent with our consideration of all of
the other technologies included in these analyses. Including them on
the list for off-cycle credit generation, for purposes of compliance
with the standard, would recognize that these technologies have a
higher degree of effectiveness in reducing real-world CO2
emissions than is reflected in their 2-cycle effectiveness. EPA has
taken into account the generation of off-cycle credits by these two
technologies in determining the appropriateness of the proposed GHG
standards, considering the amount of credit, the projected degree of
penetration of these technologies, and other factors. Section III.D has
a more detailed discussion on the feasibility of the standards within
the context of the flexibilities (such as off-cycle credits) proposed
in this rule. As discussed in section III.D, EPA plans to incorporate
the off-cycle credits for these two technologies in the cost analysis
for the final rule (which EPA anticipates would slightly reduce costs
with no change to benefits). EPA requests comments on this approach for
stop start and active aerodynamic improvements.
Although EPA believes that there is sufficient information to
estimate performance of other listed technologies for purposes of a
credit program, EPA does not believe it appropriate to reflect these
technologies in setting the level of standards at this point. There
remains significant uncertainty as to the extent listed technologies
other than stop start and active aerodynamic improvements may be used
across the light duty fleet and (in some instances) costs of the
technologies. Including them in the
[[Page 75023]]
standard setting, as is done with A/C control technology, calls for a
reasonable projection of the penetration of these technologies across
the fleet and over time, along with reasonable estimates of their cost.
EPA does not have adequate data at this point in time to make such
fleet wide projections for other technologies on the list, or for other
technologies addressed by the case-by-case approach. As in the 2012-
2016 rule, the use of these technologies continues to be not nearly so
well developed and understood for purposes of consideration in setting
the standards. See 75 FR at 25438. Technologies that are considered by
EPA in setting the standard, as discussed in section III.D and in
Chapter 3 of the TSD, may not generate off-cycle credits under this
approach, except for active aerodynamic improvements and stop
start.\319\ This would amount to the double counting discussed at 75 FR
25438, as EPA has already considered these technologies and assigned
them an emission reduction effectiveness for purposes of standard
setting, and has enough information on effectiveness, cost, and
applicability to project their use for purposes of standard setting.
EPA will reassess the list above for the Final Rule, based on
additional information that becomes available during the comment
period. It may also be appropriate to reconsider this approach as part
of the mid-term evaluation as information on these technologies'
applicability, costs, and performance becomes more robust.
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\319\ Section III.D provides EPA projected technology
penetration rates. Technologies projected to be used to meet the
standards would not be eligible for off-cycle credits, with the
exception of stop start and active aerodynamic improvements.
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EPA proposes to cap the amount of credits a manufacturer could
generate using the above list to 10 g/mile per year on a combined car
and truck fleet-wide average basis. The cap would not apply on a
vehicle model basis, allowing manufacturers the flexibility to focus
off-cycle technologies on certain vehicle models and generate credits
for that vehicle model in excess of 10 g/mile. EPA is proposing a
fleet-wide cap because the proposed credits are based on limited data,
and also EPA recognizes that some uncertainty is introduced when
credits are provided based on a general assessment of off-cycle
performance as opposed to testing on the individual vehicle models.
Also, as discussed in Chapter 5 of the draft TSD, EPA believes the
credits proposed are based on conservative estimates, providing
additional assurance that the list would not result in an overall loss
of CO2 benefits. EPA proposes that manufacturers wanting to
generate credits in excess of the 10 g/mile limit for these listed
technologies could do so by generating necessary data and going through
the credit approval process described below in Section III.C.5.b.iii
and iv.
As noted above, EPA proposes to make the list available for credit
generation starting in MY 2017. Prior to MY 2017, manufacturers would
need to demonstrate off-cycle emissions reductions in order to generate
credits for off-cycle technologies, including those on the list.
Requirements for demonstrating off-cycle credits not based on the list
are described below. Manufacturers may also opt to generate data for
listed technologies in MY 2017 and later where they are able to
demonstrate a credit value greater than that provided on the list.
Prior to MY 2017, EPA would continue to evaluate off-cycle
technologies. Based on data provided by manufacturers for non-listed
technologies, and other available data, EPA would consider adding
technologies to the list through rulemaking. EPA could also issue
guidance in the future for additional off-cycle technologies,
indicating the level of credits that EPA expects could be approved for
any manufacturer through the case-by-case approach, helping to
streamline the case-by-case approach until a rulemaking was conducted
to update the list. If the CO2 reduction benefits of a
technology have been established through manufacturer data and testing,
EPA believes that it would be appropriate to list the technology and a
conservative associated credit value.
Since one purpose of the off-cycle credits is to encourage market
penetration of the technologies (see 75 FR at 25438), EPA also proposes
to require minimum penetration rates for several of the listed
technologies as a condition for generating credit from the list as a
way to further encourage their widespread adoption by MY 2017 and
later. The proposed minimum penetration rates for the various
technologies are provided in Table III-17. At the end of the model year
for which the off-cycle credit is claimed, manufacturers would need to
demonstrate that production of vehicles equipped with the technologies
for that model year exceeded the percentage thresholds in order to
receive the listed credit. EPA proposes to set the threshold at 10
percent of a manufacturer's overall combined car and light truck
production except for technologies specific to HEVs/PHEVs/EVs and
exhaust heat recovery. EPA believes 10 percent is an appropriate
threshold as it would encourage manufacturers to develop technologies
for use on larger volume models and bring the technologies into the
mainstream. On the other hand, EPA is not proposing a larger value
because EPA does not want to discourage the use of technologies. For
solar roof panels (solar control) and electric heater circulation
pumps, which are HEV/PHEV/EV-specific, EPA is not proposing a minimum
penetration rate threshold for credit generation. Hybrids and EVs may
be a small subset of a manufacturer's fleet, less than 10 percent in
some cases, and EPA does not believe establishing a threshold for
hybrid-based technologies would be useful and could unnecessarily
impede the introduction of these technologies. EPA is also not
proposing to apply a minimum penetration threshold to exhaust heat
recovery because the threshold could impede rather than encourage the
development of the technology due to its relatively early stage of
development and potentially high cost. EPA requests comments on
applying this type of threshold, the appropriateness of 10 percent as
the threshold for several of the listed technologies, and the proposed
treatment of HEV/PHEV/EV specific technologies and exhaust heat
recovery.
ii. Proposed Technology Eligibility Criteria
EPA proposes to remove the criteria in the 2012-2016 rule that off-
cycle technologies must be `new, innovative, and not widespread'
because these terms are imprecise and have created implementation
issues and uncertainty in the program. For example, it is unclear if
technologies developed in the past but not used extensively would be
considered new, if only the first one or two manufacturers using the
technology would be eligible or if all manufacturers could use a
technology to generate credits, or if credits for a technology would
sunset after a period of time. It has also been unclear if a technology
such as active aerodynamics would be eligible since it provides a small
measurable reduction on the 2-cycle test but provides additional
reductions off-cycle, especially during high speed driving. These
criteria have interfered with the goal of providing an incentive for
the development and use of off-cycle technology that reduces
CO2 emissions. EPA proposes this approach for new MY 2012-
2016 credits as well as for MY 2017-2025.
EPA believes it is appropriate to provide credit opportunities for
technologies that achieve real world
[[Page 75024]]
reductions beyond those measured under the two-cycle test without
further making (somewhat subjective) judgments regarding the newness
and innovativeness of the technology. Instead, EPA proposes to provide
off-cycle credits for any technologies that are added to a vehicle
model that are demonstrated to provide significant incremental off-
cycle CO2 reductions, like those on the list. The proposed
technology demonstration and step-by-step application process is
described in detail below in section III.C.5.b.ii. EPA is proposing to
clarify that technologies providing small reductions on the 2-cycle
tests but additional significant reductions off-cycle could be eligible
to generate off-cycle credits. EPA thus proposes to remove the ``not
significantly measurable over the 2-cycle test'' criteria. EPA proposes
that, instead, manufacturers must be able to make a demonstration
through testing with and without the off-cycle technology.
As noted above, EPA proposes that technologies included in EPA's
assessment in this rulemaking of technology for purposes of developing
the standard would not be allowed to generate off-cycle credits, as
their cost and effectiveness and expected use are already included in
the assessment of the standard. (As explained above, the agencies have
done so with respect to stop start and active aerodynamic improvements
by including the projected level of credits in determining the
appropriateness of the proposed standards.) EPA proposes that
technologies integral or inherent to the basic vehicle design including
engine, transmission, mass reduction, passive aerodynamic design, and
base tires would not be eligible for credits. For example,
manufacturers would not be able to generate off-cycle credits by moving
to an eight-speed transmission. EPA believes that it would be difficult
to clearly establish an appropriate A/B test (with and without
technologies) for technologies so integral to the basic vehicle design.
EPA proposes to limit the off-cycle program to technologies that can be
clearly identified as add-on technologies conducive to A/B testing.
Further, EPA would not provide credits for a technology required to be
used by Federal law, such as tire pressure monitoring systems, as EPA
would consider such credits to be windfall credits (i.e. not generated
as a result of the rule). The base versions of such technologies would
be considered part of the base vehicle. However, if a manufacturer
demonstrates that an improvement to such technologies provides
additional off-cycle benefits above and beyond a system meeting minimum
Federal requirements, those incremental improvements could be eligible
for off-cycle credits, assuming an appropriate quantification of
credits is demonstrated.
By proposing to remove the ``new, innovative, not widespread use''
criteria in the present rule, EPA is also making clear that once
approved, EPA does not intend to sunset a technology's credit
eligibility or deny credits to other vehicle applications using the
technology, as may have been implied by those criteria under the MY
2012-2016 program. EPA believes, at this time, that it should encourage
the wider use of technologies with legitimate off-cycle emissions
benefits. Manufacturers demonstrating through the EPA approval process
that the technology is effective on additional vehicle models would be
eligible for credits. Limiting the application of a technology or
sunsetting the availability of credits during the 2017-2025 time frame
would be counterproductive because it would remove part of the
incentive for manufacturers to invest in developing and deploying off-
cycle technologies, some of which may be promising but have
considerable development costs associated with them. Also, approving a
technology only to later disallow it could lead to a manufacturer
discontinuing the use of the technology even if it remained a cost
effective way to reduce emissions. EPA also believes that this approach
provides an incentive for manufacturers to continue to improve
technologies without concern that they will become ineligible for
credits at some future time. EPA requests comments on all aspects of
the above approach for the off-cycle credits program criteria.
iii. Demonstrating Off-Cycle Emissions Reductions
5-Cycle Testing
EPA is retaining a two-tiered process for demonstrating the
CO2 reductions of off-cycle technologies (in those instances
when a manufacturer is not using the default value provided by the
rule), but is clarifying several of the requirements. The process
described below would be used for all credits not based on the pre-
defined list described in Section III.C.5.i, above. As noted above, the
proposed approach would replace the requirement in the 2012-2016 rule
that technology must not be ``significantly measurable'' over the 2-
cycle test. See section 86. 1866-12 (d) (ii). This criterion has been
problematic because several technologies provide some benefit on the 2-
cycle test but much greater benefits off-cycle. Under today's proposal,
technologies would need to be demonstrated to provide significant
incremental off-cycle benefits above and beyond those provided over the
2-cycle test (examples are shown below). EPA proposes this approach for
new MY 2012-2016 credits as well as for MY 2017-2025.
The 5-cycle test procedures would remain the starting point for
demonstrating off-cycle emissions reductions. The MY 2012-2016
rulemaking established general 5-cycle testing requirements and EPA is
proposing several provisions to delineate what EPA would expect as part
of a 5-cycle based demonstration. Manufacturers requested clarification
on the amount of 5-cycle testing that would be needed to demonstrate
off-cycle credits, and EPA is proposing the following as part of the
step-by-step methodology manufacturers would follow to generate
credits. In addition to the general 5-cycle demonstration requirements
of the MY 2012-2016 program, EPA proposes to specifically require
model-based verification of 5-cycle results where off-cycle reductions
are small and could be a product of testing variability. EPA is also
proposing to specifically require that all applications include an
engineering analysis for why the technology provides off-cycle
emissions reductions. EPA proposes to specify that manufacturers would
run an initial set of three 5-cycle tests with and without the
technology providing the off-cycle CO2 reduction. Testing
must be conducted on a representative vehicle, selected using good
engineering judgment, for each vehicle model. EPA proposes that
manufacturers could bundle off-cycle technologies together for testing
in order to reduce testing costs and improve their ability to
demonstrate consistently measurable reductions over the tests. If these
A/B 5-cycle tests demonstrate an off-cycle benefit of 3 percent or
greater, comparing average test results with and without the off-cycle
technology, the manufacturer would be able to use the data as the basis
for credits. EPA has long used 3 percent as a threshold in fuel economy
confirmatory testing for determining if a manufacturer's fuel economy
test results are comparable to those run by EPA.\320\
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\320\ 40 CFR 600.008 (b)(3).
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If the initial three sets of 5-cycle results demonstrate a
reduction of less than a 3 percent difference in the 5-cycle results
with and without the off-cycle technology, the manufacturer
[[Page 75025]]
would have to run two additional 5-cycle tests with and without the
off-cycle technologies and verify the emission reduction using the EPA
Light-duty Simulation Tool described below. If the simulation tool
supports credits that are less than 3 percent of the baseline 2-cycle
emissions, then EPA would approve the credits based on the test
results. As outlined below, credits based on this methodology would be
subject to a 60 day EPA review period starting when EPA receives a
complete application, which would not include a public review.
EPA believes that small off-cycle credit claims (i.e., less than 3
percent of the vehicle model 2-cycle CO2 level) should be
supported with modeling and engineering analysis. EPA is proposing the
approach above for a number of reasons. Emissions reductions of only a
few grams may not be statistically significant and could be the product
of gaming. Also, manufacturers have raised test-to-test variability as
an issue for demonstrating technologies through 5-cycle testing.
Modeling and engineering analyses can help resolve these questions. EPA
also requests comments on allowing manufacturers to use the EPA
simulation tool and engineering analysis in lieu of additional 5-cycle
testing. For some technologies providing very small incremental
benefits, it may not be possible to accurately measure their benefit
with vehicle testing.
Demonstrations Not Based on 5-Cycle Testing
In cases where the benefit of a technological approach to reducing
CO2 emissions cannot be adequately represented using 5-cycle
testing, manufacturers will need to develop test procedures and
analytical approaches to estimate the effectiveness of the technology
for the purpose of generating credits. See 75 FR at 25440. EPA is not
proposing to make significant changes to this aspect of the program. If
the 5-cycle process is inadequate for the specific technology being
considered by the manufacturer (i.e., the 5-cycle test does not
demonstrate any emissions reductions), then an alternative approach may
be developed by the manufacturer and submitted to EPA for approval. The
demonstration program must be robust, verifiable, and capable of
demonstrating the real-world emissions benefit of the technology with
strong statistical significance. The methodology developed and
submitted to EPA would be subject to public review as explained at 75
FR 25440 and in 86.1866(d)(2)(ii).
EPA has identified two general situations where manufacturers would
need to develop their own demonstration methodology. The first is a
situation where the technology is active only during certain operating
conditions that are not represented by any of the 5-cycle tests. To
determine the overall emissions reductions, manufacturers must
determine not only the emissions impacts during operation but also
real-world activity data to determine how often the technology is
utilized during actual, in-use driving on average across the fleet. EPA
has identified some of these types of technologies and has calculated a
default credit for them, including items such as high efficiency (e.g.,
LED) lights and solar panels on hybrids. See Table III-17 above. In
their demonstrations, manufacturers may be able to apply the same type
of methodologies used by EPA as a basis for these default values (see
TSD Chapter 5).
The second type of situation where manufacturers would need to
develop their own demonstration data would be for technologies that
involve action by the driver to make the technology effective in
reducing CO2 emissions. EPA believes that driver interactive
technologies face the highest demonstration hurdle because
manufacturers would need to provide actual real-world usage data on
driver response rates. Such technologies would include ``eco buttons''
where the driver has the option of selecting more fuel efficient
operating modes, traffic avoidance systems, and more advanced tire
pressure monitor systems (i.e., technologies that go beyond the minimum
Federal requirements) notifying the driver to fill their tires more
often.\321\ EPA proposes that data would need to be from instrumented
vehicle studies and not through driver surveys where results may be
influenced by drivers failure to accurately recall their response
behavior. Systems such as On-star could be one promising way to collect
driver response data if they are designed to do so. Manufacturers might
have to design extensive on-road test programs. Any such on-road
testing programs would need to be statistically robust and based on
average U.S. driving conditions, factoring in differences in geography,
climate, and driving behavior across the U.S. EPA proposes this
approach for new MY 2012-2016 credits as well as for MY 2017-2025.
---------------------------------------------------------------------------
\321\ A tire pressure monitor system that also automatically
fills the tire without driver interaction would obviously not
involve driver response data for the automatic system, but the
demonstration may involve the driver response rates for the baseline
system to determine an incremental credit.
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EPA Light-Duty Vehicle Simulation Tool
As explained above and, EPA has developed full vehicle simulation
capabilities in order to support regulations and vehicle compliance by
quantifying the effectiveness of different technologies over a wide
range of engine and vehicle operating conditions. This in-house
simulation tool has been developed for modeling a wide variety of
light, medium, and heavy duty vehicle applications over various driving
cycles. In order to ensure transparency of the models and free public
access, EPA has developed the tool in MATLAB/Simulink environment with
a completely open source code. EPA's first application of the vehicle
simulation tool was for purposes of heavy-duty vehicle compliance and
certification. For the model years 2014 to 2017 final rule for medium
and heavy duty trucks, EPA created the ``Greenhouse gas Emissions
Model'' (GEM), which is used both to assess Class 2b-8 vocational
vehicle and Class \7/8\ combination tractor GHG emissions and fuel
efficiency and to demonstrate compliance with the vocational vehicle
and combination tractor standards. See 76 FR at 57146-147.\322\ EPA
will submit the simulation tool for peer review for the final rule.
Chapter 2 of the Draft RIA has more details of this simulation tool.
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\322\ See also US EPA, ``Final Rule Making to Establish
Greenhouse Gas Emissions Standards and Fuel Efficiency Standards for
Medium- and Heavy-Duty Engines and Vehicles,'' Heavy-Duty Regulatory
Impact Analysis.give cite to where GEM is written up in the heavy
duty RIA.
---------------------------------------------------------------------------
As mentioned previously, the tool is based on MATLAB/Simulink and
is a forward-looking full vehicle model that uses the same physical
principles as other commercially available vehicle simulation tools
(e.g. Autonomie, AVL-CRUISE, GT-Drive, etc.) to derive the governing
equations. These governing equations describe steady-state and
transient behaviors of each of electrical, engine, transmission,
driveline, and vehicle systems, and they are integrated together to
provide overall system behavior during transient conditions as well as
steady-state operations. In the light-duty vehicle simulation tool,
there are four key system elements that describe the overall vehicle
dynamics behavior and the corresponding fuel efficiency: Electrical,
engine, transmission, and vehicle. The electrical system model consists
of parasitic electrical load and A/C blower fan, both of which were
assumed to be constant. The engine system model is comprised
[[Page 75026]]
of engine torque and fueling maps. For the vehicle system, four
vehicles were modeled: Small, mid, large size passenger vehicles, and a
light-duty pick-up truck. The engine maps, transmission gear ratios and
shifting schedules were appropriately sized and adjusted according to
the vehicle type represented by the simulation. This tool is capable of
simulating a wide range of conventional and advanced engines,
transmissions, and vehicle technologies over various driving cycles. It
evaluates technology package effectiveness while taking into account
synergy (and dis-synergy) effects among vehicle components and
estimates GHG emissions for various combinations of technologies.
Chapter 2 of the Draft Regulatory Impact Analysis provides more details
on this light-duty vehicle simulation tool.
As discussed in section III.C.1, EPA has used the light-duty
vehicle simulation tool to estimate indirect A/C CO2
emissions from conventional (non-hybrid) vehicles, helping to quantify
the indirect A/C credit. In addition to A/C related CO2
reductions, EPA believes this same simulation tool may be useful in
estimating CO2 reductions from off-cycle technologies.
Currently, the model provides A/B relative comparisons with and without
technologies that can help inform credits estimates. EPA has used it to
estimate credits for some of the technologies in the proposed pre-
defined list, including active aerodynamic improvements. As discussed
above, EPA is proposing to require this simulation tool be used as an
additional way to estimate emissions reductions in cases where the 5-
cycle test results indicate the potential reductions to be small, and
EPA is also requesting comments on using the simulation tool as a basis
for estimating off-cycle credits in lieu of 5-cycle testing.
There are a number of technologies that could bring additional GHG
reductions over the 5-cycle drive test (or in the real world) compared
to the combined FTP/Highway (or two) cycle test. These are called off-
cycle technologies and are described in chapter 5 of the Joint TSD in
detail. Among them are technologies related to reducing vehicle's
electrical loads, such as High Efficiency Exterior Lights, Engine Heat
Recovery, and Solar Roof Panels. In an effort to streamline the process
for approving off-cycle credits, we have set a relatively conservative
estimate of the credit based on our efficacy analysis. EPA seeks
comment on utilizing the model in order to quantify the credits more
accurately, for example, if actual data of electrical load reduction
and/or on-board electricity generation by one or more of these
technologies is available through data submission from manufacturers.
Similarly, there are technologies that would provide additional GHG
reduction benefits in the 5-cycle test by actively reducing the
vehicle's aerodynamic drag forces. These are referred to as active
aerodynamic technologies, which include but are not limited to Active
Grill Shutters and Active Suspension Lowering. Like the electrical load
reduction technologies, the vehicle simulation tool can be used to more
accurately estimate the additional GHG reductions (therefore the
credits) provided by these active aerodynamic technologies over the 5-
cycle drive test. EPA seeks comment on using the simulation tool in
order to quantify these credits. In order to do this properly,
manufacturers would be expected to submit two sets of coast-down
coefficients (with and without the active aerodynamic technologies).
There are other technologies that would result in additional GHG
reduction benefits that cannot be fully captured on the combined FTP/
Highway cycle test. These technologies typically reduce engine loads by
utilizing advanced engine controls, and they range from enabling the
vehicle to turn off the engine at idle, to reducing cabin temperature
and thus A/C compressor loading when the vehicle is restarted. Examples
include Engine Start-Stop, Electric Heater Circulation Pump, Active
Engine/Transmission Warm-Up, and Solar Control. For these types of
technologies, the overall GHG reduction largely depends on the control
and calibration strategies of individual manufacturers and vehicle
types. Also, the current vehicle simulation tool does not yet have the
capability to properly simulate the vehicle behaviors that depend on
thermal conditions of the vehicle and its surroundings, such as Active
Engine/Transmission Warm-Up and Solar Control. Therefore, the vehicle
simulation may not provide full benefits of the technologies on the GHG
reductions. For this reason, the agency is not proposing to use the
simulation tool to generate the GHG credits for these technologies at
this time, though future versions of the model may be more capable of
quantifying the efficacy of these off-cycle technologies as well.
iv. In-Use Emissions Requirements
EPA requires off-cycle components to be durable in-use and
continues to believe that this is an important aspect of the program.
See 86.1866-12 (d)(1)(iii). The technologies upon which the credits are
based are subject to full useful life compliance provisions, as with
other emissions controls. Unless the manufacturer can demonstrate that
the technology would not be subject to in-use deterioration over the
useful life of the vehicle, the manufacturer must account for
deterioration in the estimation of the credits in order to ensure that
the credits are based on real in-use emissions reductions over the life
of the vehicle. In-use requirements would apply to technologies
generating credits based on the pre-defined list as well as to those
based on a manufacturer's demonstration.
Manufacturers have requested clarification of these provisions and
guidance on how to demonstrate in-use performance. EPA is proposing to
clarify that off-cycle technologies are considered emissions related
components and all in-use requirements apply including defect
reporting, warranty, and recall. OBD requirements do not apply under
the MY 2012-2016 program and EPA is not proposing any OBD requirements
at this time for off-cycle technologies. Manufacturers may establish
maintenance intervals for these components in the same way they would
for other emissions related components. The performance of these
components would be considered in determining compliance with the
applicable in-use CO2 standards. Manufacturers may
demonstrate in-use emissions durability at time of certification by
submitting an engineering analysis describing why the technology is
durable and expected to last for the full useful life of the vehicle.
This demonstration may also include component durability testing or
through whole vehicle aging if the manufacturer has such data. The
demonstration would be subject to EPA approval prior to credits being
awarded.\323\ EPA believes these provisions are important to ensure
that promised emissions reductions and fuel economy benefit to the
consumer are delivered in-use. EPA requests comments on the above
approach for in-use emissions durability.
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\323\ Listed technologies are pre-approved assuming the
manufacturer demonstrates durability.
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v. Step-by-Step EPA Review Process
EPA proposes to provide a step-by-step process and timeline for
reviewing credit applications and providing a decision to
manufacturers. EPA requests comments on the process described below
including comments on how to further improve or streamline it while
maintaining its effectiveness. EPA
[[Page 75027]]
proposes these clarifications and further detailed step-by-step
instructions for new MY 2012-2016 credits as well as for MY 2017-2025.
EPA believes these additional details are consistent with the general
off-cycle requirements adopted in the MY 2012-2016 rule. Starting in MY
2017, EPA is proposing that manufacturers may generate credits using
technologies on a pre-defined list, and these technologies would not be
required to go through the approval process described below.
Step 1: Manufacturer Conducts Testing and Prepares Application
5-cycle--Manufacturers would conduct the testing and/or
simulation described above
Non 5-cycle--Manufacturers would develop a methodology for non
5-cycle based demonstration and carry-out necessary testing and
analysis
[cir] Manufacturers may opt to meet with EPA to discuss their plans
for demonstrating technologies and seek EPA input prior to conducting
testing or analysis
Manufacturers conduct engineering analysis and/or testing to
demonstrate in-use durability
Step 2: Manufacturer Submits Application
The manufacturer application must contain the following:
Description of the off-cycle technologies and how they
function to reduce off-cycle emissions
The vehicle models on which the technology will be applied
Test vehicles selection and supporting engineering analysis
for their selection
5-cycle test data, and/or including simulation results using
EPA Light-duty Simulation Tool, as applicable
For credits not based on 5-cycle testing, a complete
description of methodology used to estimate credits and supporting data
(vehicle test data and activity data)
[cir] Manufacturer may seek EPA input on methodology prior to
conducting testing or analysis
An estimate of off-cycle credits by vehicle model, and
fleetwide based on projected vehicle sales
Engineering analysis and/or component durability testing or
whole vehicle test data (as necessary) demonstrating in-use durability
of components
Step 3: EPA Review
Once EPA receives an application, EPA would do the following:
EPA will review the application for completeness and within 30
days will notify the manufacturer if additional information is needed
EPA will review the data and information provided to determine
if the application supports the level of credits estimated by
manufacturers
EPA will consult with NHTSA on the application and the data
received in cases where the manufacturer intends to generate fuel
consumption improvement values for CAFE in MY 2017 and later
For applications where the rule specifies public participation
in the review process, EPA will make the applications available to the
public within 60 days of receiving a complete application
[cir] The public review period will be 30 day review of the
methodology used by the manufacturer to estimate credits, during which
time the public may submit comments.
[cir] Manufacturers may submit a written rebuttal of comments for
EPA consideration or may revise their application in response to
comments following the end of the public review period.
Step 4: EPA Decision
For applications where the rule does not specify public
participation and review, EPA, after consultation with NHTSA in cases
where the manufacturer intends to generate fuel consumption improvement
values for CAFE in MY 2017 and later, will notify the manufacturer of
its decision within 60 days of receiving a complete application.
For applications where the rule does specify public
participation and review, EPA will notify the manufacturer of its
decision on the application after reviewing public comments.
EPA will notify manufacturers in writing of its decision
to approve or deny the credits application, and provide a written
explanation for its action (supported by the administrative record for
the application proceeding).
c. Off-Cycle Technology Fuel Consumption Improvement Values in the CAFE
Program
EPA proposes, in coordination with NHTSA, that manufacturers would
be able to generate fuel consumption improvement values equivalent to
CO2 off-cycle credits for use in the CAFE program. EPA is
proposing that a CAFE improvement value for off-cycle improvements be
determined at the fleet level by converting the CO2 credits
determined under the EPA program (in metric tons of CO2) for
each fleet (car and truck) to a fleet fuel consumption improvement
value. This improvement value would then be used to adjust the fleet's
CAFE level upward. See the proposed regulations at 40 CFR 600.510-12.
Note that while the following table presents fuel consumption values
equivalent to a given CO2 credit value, these consumption
values are presented for informational purposes and are not meant to
imply that these values will be used to determine the fuel economy for
individual vehicles. For off-cycle CO2 credits not based on
the list, manufacturers would go though the steps described above in
Section III.C.5.b. Again, all off-cycle CO2 credits would be
converted to a gallons per mile fuel consumption improvement value at a
fleet level for purposes of the CAFE program. EPA would approve credit
generation, and corresponding equivalent fuel consumption improvement
values, in consultation with NHTSA.
[[Page 75028]]
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D. Technical Assessment of the Proposed CO2 Standards
This proposed rule is based on the need to obtain significant GHG
emissions reductions from the transportation sector, and the
recognition that there are cost-effective technologies available in
this timeframe to achieve such reductions for MY 2017-2025 light duty
vehicles. As in many prior mobile source rulemakings, the decision on
what standard to set is largely based on the effectiveness of the
emissions control technology, the cost and other impacts of
implementing the technology, and the lead time needed for manufacturers
to employ the control technology. The standards derived from assessing
these factors are also evaluated in terms of the need for reductions of
greenhouse gases, the degree of reductions achieved by the standards,
and the impacts of the standards in terms of costs, quantified
benefits, and other impacts of the standards. The availability of
technology to achieve reductions and the cost and other aspects of this
technology are therefore a central focus of this rulemaking.
EPA is taking the same basic approach in this rulemaking as that
taken in the MYs 2012-2016 rulemaking. EPA is evaluating emissions
control technologies which reduce CO2 and other greenhouse
gases. CO2 emissions from automobiles are largely the
product of fuel combustion. Vehicles combust fuel to perform two basic
functions: (1) to transport the vehicle, its passengers and its
contents (and any towed loads), and (2) to operate various accessories
during the operation of the vehicle such as the air conditioner.
Technology can reduce CO2 emissions by either making more
efficient use of the energy that is produced through combustion of the
fuel or reducing the energy needed to perform either of these
functions.
This focus on efficiency calls for looking at the vehicle as an
entire system, and as in the MYs 2012-2016 rule, the proposed standards
reflect this basic paradigm. In addition to fuel delivery, combustion,
and aftertreatment technology, any aspect of the vehicle that affects
the need to produce energy must also be considered. For example, the
efficiency of the transmission system, which takes the energy produced
by the engine and transmits it to the wheels, and the resistance of the
tires to rolling both have major impacts on the amount of fuel that is
combusted while operating the vehicle. The braking system, the
aerodynamics of the vehicle, and the efficiency of accessories, such as
the air conditioner, all affect how much fuel is combusted as well.
In evaluating vehicle efficiency, we have excluded fundamental
changes in vehicles' utility.\324\ For example, we did not evaluate
converting minivans and SUVs to station wagons, converting vehicles
with four wheel drive to two wheel drive, or reducing headroom in order
to lower the roofline and reduce aerodynamic drag. We have limited our
assessment of technical feasibility and resultant vehicle cost to
technologies which maintain vehicle utility as much as possible (and,
in our assessment of the costs of the rule, included the costs to
manufacturers of preserving vehicle utility). Manufacturers may decide
to alter the utility of the vehicles which they sell, but this would
not be a
[[Page 75029]]
necessary consequence of the rule but rather a matter of automaker
choice.
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\324\ EPA recognizes that electric vehicles, a technology
considered in this analysis, have unique attributes and discusses
these considerations in Section III.H.1.b. There is also a fuller
discussion of the utility of Atkinson engine hybrid vehicles in EPA
DRIA Chapter 1.
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This need to focus on the efficient use of energy by the vehicle as
a system leads to a broad focus on a wide variety of technologies that
affect vehicle design. As discussed below, there are many technologies
that are currently available which can reduce vehicle energy
consumption. Several of these are ``game-changing'' technologies and
are already being commercially utilized to a limited degree in the
current light-duty fleet. Examples include hybrid technologies that use
high efficiency batteries and electric motors as the power source in
combination with or instead of internal combustion engines, plug-in
hybrid electric vehicles, and battery-electric vehicles. While already
commercialized, these technologies continue to be developed and offer
the potential for even more significant efficiency improvements. There
are also other advanced technologies under development and not yet on
production vehicles, such as high BMEP engines with cooled EGR, which
offer the potential of improved energy generation taking the gasoline
combustion process nearly to its thermodynamic limit. In addition, the
available technologies are not limited to powertrain improvements but
also include a number of technologies that are expected to continually
improve incrementally, such as engine friction reduction, rolling
resistance reduction, mass reduction, electrical system efficiencies,
and aerodynamic improvements.
The large number of possible technologies to consider and the
breadth of vehicle systems that are affected mean that consideration of
the manufacturer's design, product development and manufacturing
process plays a major role in developing the proposed standards.
Vehicle manufacturers typically develop many different models by basing
them on a limited number of vehicle platforms. The platform typically
consists of a common set of vehicle architecture and structural
components.\325\ This allows for efficient use of design and
manufacturing resources. Given the very large investment put into
designing and producing each vehicle model, manufacturers typically
plan on a major redesign for the models approximately every 5
years.\326\ At the redesign stage, the manufacturer will upgrade or add
all of the technology and make most other changes supporting the
manufacturer's plans for the next several years, including plans to
comply with emissions, fuel economy, and safety regulations.\327\ This
redesign often involves significant engineering, development,
manufacturing, and marketing resources to create a new product with
multiple new features. In order to leverage this significant upfront
investment, manufacturers plan vehicle redesigns with several model
years' of production in mind. Vehicle models are not completely static
between redesigns as limited changes are often incorporated for each
model year. This interim process is called a refresh of the vehicle and
generally does not allow for major technology changes although more
minor ones can be done (e.g., small aerodynamic improvements, valve
timing improvements, etc). More major technology upgrades that affect
multiple systems of the vehicle thus occur at the vehicle redesign
stage and not in the time period between redesigns.
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\325\ Examples of shared vehicle platforms include the Ford
Taurus and Ford Explorer or the Chrysler Sebring and Dodge Journey.
\326\ See TSD Chapter 3.
\327\ TSD 3 discusses redesign schedules in greater detail.
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This proposal affects nine years of vehicle production, model years
2017-2025. Given the now-typical five year redesign cycle, many
vehicles will be redesigned three times between MY 2012 and MY 2025 and
are expected to be redesigned twice during the 2017-2025 timeframe. Due
to the relatively long lead time before 2017, there are fewer lead time
concerns with regard to product redesign in this proposal than with the
MYs 2012-2016 rule (or the MY 2014-2018 rule for heavy duty vehicles
and engines). However, there are still some technologies that require
significant lead time, and are not projected to be heavily utilized in
the first years of this proposal. An example is the advanced high BMEP,
cooled EGR engines. As these engines are not yet in vehicles today, a
research and development period is required, even if there are a number
of demonstration projects complete (as discussed in Chapter 3 of the
joint TSD).
In developing the proposed MY 2021 and 2025 car and truck curves
(discussed in Section III.B), EPA used the OMEGA model to evaluate
technologies that manufacturers could use to comply with the targets
which those curves would establish. These curves correspond to sales-
weighted fleetwide CO2 average targets of 200 g/mile in MY
2021 and 163 g/mile in MY 2025. As discussed later in this section, we
believe that this level of technology application to the light-duty
vehicle fleet can be achieved in this time frame, the standards will
produce significant reductions in GHG emissions, and the costs for both
the industry and the costs to the consumer are reasonable and that
consumer savings due to improved fuel economy will more than pay for
the increased vehicle cost over the life of the vehicles. EPA also
estimated costs for the intermediate model years 2017 through 2020
based on the OMEGA analyses in MYs 2016 and 2021 as well as the
intermediate model years 2022-2024 based on the OMEGA analyses in MYs
2021 and 2025.
EPA's technical assessment of the proposed MY2017-2025 standards is
described below. EPA has also evaluated a set of alternative standards
for these model years, two of which are more stringent and two of which
are less stringent than the standards proposed. The technical
assessment of these alternative standards in relation to the ones
proposed is discussed at the end of this section.
Evaluating the appropriateness of these standards includes a core
focus on identifying available technologies and assessing their
effectiveness, cost, and impact on relevant aspects of vehicle
performance and utility. The wide number of technologies which are
available and likely to be used in combination requires a sophisticated
assessment of their combined cost and effectiveness. An important
factor is also the degree that these technologies are already being
used in the current vehicle fleet and thus, unavailable for use to
improve energy efficiency beyond current levels. Finally, the challenge
for manufacturers to design the technology into their products within
the constraints of the redesign cycles, and the appropriate lead time
needed to employ the technology over the product line of the industry
must be considered.
Applying these technologies efficiently to the wide range of
vehicles produced by various manufacturers is a challenging task
involving dozens of technologies and hundreds of vehicle platforms. In
order to assist in this task, EPA is again using a computerized program
called the Optimization Model for reducing Emissions of Greenhouse
gases from Automobiles (OMEGA). Broadly, OMEGA starts with a
description of the future vehicle fleet (i.e. the `reference fleet';
see section II.B above), including manufacturer, sales, base
CO2 emissions, footprint and the extent to which emission
control technologies are already employed. For the purpose of this
analysis, EPA uses OMEGA to analyze over 200 vehicle platforms
comprising approximately 1300 vehicle models in order o capture the
important differences in vehicle and engine design and utility of
future vehicle sales of roughly 16-18 million
[[Page 75030]]
units annually in the 2017-2025 timeframe. The model is then provided
with a list of technologies which are applicable to various types of
vehicles, along with the technologies' cost and effectiveness and the
percentage of vehicle sales which can receive each technology during
the redesign cycle of interest. The model combines this information
with economic parameters, such as fuel prices and a discount rate, to
project how various manufacturers would apply the available technology
in order to meet increasing levels of emission control. The result is a
description of which technologies are added to each vehicle platform,
along with the resulting cost. While OMEGA can apply technologies which
reduce CO2 efficiency related emissions and refrigerant
leakage emissions associated with air conditioner use, this task is
currently handled outside of the OMEGA model. A/C improvements are
relatively cost-effective, and would always be added to vehicles by the
model, thus they are simply added into the results at the projected
penetration levels. The model can also be set to account for the
various proposed compliance flexibilities (and to accommodate
compliance flexibilities in general.
The remainder of this section describes the technical feasibility
analysis in greater detail. Section III.D.1 describes the development
of our reference and control case projections of the MY 2017-2025
fleet. Section III.D.2 describes our estimates of the effectiveness and
cost of the control technologies available for application in the 2017-
2025 timeframe. Section III.D.3 describes how these technologies are
combined into packages likely to be applied at the same time by a
manufacturer. In this section, the overall effectiveness of the
technology packages vis-[agrave]-vis their effectiveness when adopted
individually is described. Section III.D.4 describes EPA's OMEGA model
and its approach to estimating how manufacturers will add technology to
their vehicles in order to comply with potential CO2
emission standards. Section III.D.5 presents the results of the OMEGA
modeling, namely the level of technology added to manufacturers'
vehicles and the cost of adding that technology. Section III.D.6
discusses the appropriateness (or lack of appropriateness) of the
alternative standards in relation to those proposed. Further technical
detail on all of these issues can be found in the Draft Joint Technical
Support Document as well as EPA's Regulatory Impact Analysis.
1. How did EPA develop a reference and control fleet for evaluating
standards?
In order to calculate the impacts of this proposal, it is necessary
to project the GHG emissions characteristics of the future vehicle
fleet absent the proposed regulation. EPA and NHTSA develop this
projection using a three step process. (1) Develop a set of detailed
vehicle characteristics and sales for a specific model year (in this
case, 2008).\328\ This is called the baseline fleet. (2) Adjust the
sales of this baseline fleet using projections made by the Energy
Information Administration (EIA) and CSM to account for projected sales
volumes in future MYs absent future regulation.\329\ (3) Apply fuel
saving and emission control technology to these vehicles to the extent
necessary for manufacturers to comply with the existing 2016 standards
and the proposed standards.
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\328\ As discussed in TSD Chapter 1, and in Section II.B.2, the
agencies will consider using Model Year 2010 for the final rule,
based on availability and an analysis of the data
representativeness.
\329\ See generally Chapter 1 of the Joint TSD for details on
development of the baseline fleet, and Section III.H.1 for a
discussion of the potential sales impacts of this proposal.
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Thus, the analyzed fleet differs from the MY 2008 baseline fleet in
both the level of technology utilized and in terms of the sales of any
particular vehicle. A similar method is used to analyze both reference
and control cases, with the major distinction being the stringency of
the standards.
EPA and NHTSA perform steps one and two above in an identical
manner. The development of the characteristics of the baseline 2008
fleet and the sales adjustment to match AEO and CSM forecasts is
described in Section II.B above and in greater detail in Chapter 1 of
the joint TSD. The two agencies perform step three in a conceptually
identical manner, but each agency utilizes its own vehicle technology
and emission model to project the technology needed to comply with the
reference and proposed standards. Further, each agency evaluates its
own proposed and MY 2016 standards; neither NHTSA nor EPA evaluated the
other agency's standard in this proposal.\330\
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\330\ While the MY 2012-2016 standards are largely similar, some
important differences remain. See 75 FR at 25342.
---------------------------------------------------------------------------
The use of MY 2008 vehicles in our fleet projections includes
vehicle models which already have or will be discontinued by the time
this rule takes effect and will be replaced by more advanced vehicle
models. However, we believe that the use of MY 2008 vehicle designs is
still the most appropriate approach available for this proposal.\331\
First, as discussed in Section II.B above, the designs of these MYs
2017-2025 vehicles at the level of detail required for emission and
cost modeling are not publically available, and in many cases, do not
yet exist. Even manufacturers' confidential descriptions of these
vehicle designs are usually not of sufficient detail to facilitate the
level of technology and emission modeling performed by both agencies.
Second, steps two and three of the process used to create the reference
case fleet adjust both the sales and technology of the 2008 vehicles.
Thus, our reference fleet reflects the extent that completely new
vehicles are expected to shift the light vehicle market in terms of
both segment and manufacturer. Also, by adding technology to facilitate
compliance with the MY 2016 standards, we account for the vast majority
of ways in which these new vehicles will differ from their older
counterparts.
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\331\ See section II.B.2 concerning the selection of MY 2008 as
the appropriate baseline.
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a. Reference Fleet Scenario Modeled
EPA projects that in the absence of the proposed GHG and CAFE
standards, the reference case fleet in MY 2017-2025 would have
fleetwide GHG emissions performance no better than that projected to be
necessary to meet the MY 2016 standards. While it is not possible to
know with certainty the future fleetwide GHG emissions performance in
the absence of more stringent standards, EPA believes that this
approach is the most reasonable projection for developing the reference
case fleet for MYs 2017-2025. One important element supporting the
proposed approach is that AEO2011 projects relatively stable gasoline
prices over the next 15 years. The average actual price in the U.S. for
the first nine months of 2011 for gasoline was $3.57 per gallon ($3.38
in 2009 dollars).\332\ However, the AEO2011 reference case projects a
price of $2.80 per gallon (in 2009 dollars) AEO2011 projects prices to
be $3.25 in 2017, rising slightly to $3.54 per gallon in 2025 (which is
less than a 4 cent per year increase on average). Based on these fuel
price projections, the reference fleet for MYs 2017-2025 should
correspond to a time period where there is a stable, unchanging GHG
standard, and essentially stable gasoline prices.
---------------------------------------------------------------------------
\332\ The Energy Information Administration estimated the
average regular unleaded gasoline price in the U.S. for the first
nine months of 2011 was $3.57.
---------------------------------------------------------------------------
EPA reviewed the historical record for similar periods when we had
stable fuel economy standards and stable gasoline
[[Page 75031]]
prices. EPA maintains, and publishes every year, the seminal reference
on new light-duty vehicle CO2 emissions and fuel
economy.\333\ This report contains very detailed data from MYs 1975-
2010. There was an extended 18-year period from 1986 through 2003
during which CAFE standards were essentially unchanged,\334\ and
gasoline prices were relatively stable and remained below $1.50 per
gallon for almost the entire period. The 1975-1985 and 2004-2010
timeframes are not relevant in this regard due to either rising
gasoline prices, rising CAFE standards, or both. Thus, the 1986-2003
time frame is an excellent analogue to the period out to MY 2025 during
which AEO projects relatively stable gasoline prices. EPA staff have
analyzed the fuel economy trends data from the 1986-2003 timeframe
(during which CAFE standards did not vary by footprint) and have drawn
three conclusions: (1) there was a small, industry-wide, average over-
compliance with CAFE on the order of 1-2 mpg or 3-4%, (2) almost all of
this industry-wide over-compliance was from 3 companies (Toyota, Honda,
and Nissan) that routinely over-complied with the universal CAFE
standards simply because they produced smaller and lighter vehicles
relative to the industry average, and (3) full line car and truck
manufacturers, such as General Motors, Ford, and Chrysler, which
produced larger and heavier vehicles relative to the industry average
and which were constrained by the universal CAFE standards, rarely
over-complied during the entire 18-year period.\335\
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\333\ Light-Duty Automotive Technology, Carbon Dioxide
Emissions, and Fuel Economy Trends: 1975 through 2010, November
2010, available at http://www.epa.gov/otaq/fetrends.htm.
\334\ There are no EPA LD GHG emissions regulations prior to MY
2012.
\335\ See Regulatory Impact Analysis, Chapter 3.
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Since the MY 2012-2016 standards are footprint-based, every major
manufacturer is expected to be constrained by the new standards in 2016
and manufacturers of small vehicles will not routinely over-comply as
they had with the past universal standards.\336\ Thus, the historical
evidence and the footprint-based design of the 2016 GHG emissions and
CAFE standards strongly support the use of a reference case fleet where
there are no further fuel economy improvements beyond those required by
the MY 2016 standards. There are additional factors that reinforce the
historical evidence. While it is possible that one or two companies may
over-comply, any voluntary over-compliance by one company would
generate credits that could be sold to other companies to substitute
for their more expensive compliance technologies; this ability to buy
and sell credits could eliminate any over-compliance for the overall
fleet.\337\ NHTSA also evaluated EIA assumptions and inputs employed in
the version of NEMS used to support AEO 2011 and found, based on this
analysis, that when fuel economy standards were held constant after MY
2016, EIA appears to forecast market-driven levels of over- and under-
compliance generally consistent with a CAFE model analysis using a
flat, 2016-based reference case fleet. From a consumer market driven
perspective, while there is considerable evidence that many consumers
now care more about fuel economy than in past decades, the 2016
compliance level is projected to be several mpg higher than that being
demanded in the market today.\338\ On the other hand, some
manufacturers have already announced plans to introduce technology well
beyond that required by the 2016 MY GHG standards.\339\ However, it is
difficult, if not impossible, to separate future fuel economy
improvements made for marketing purposes from those designed to
efficiently plan for compliance with anticipated future CAFE or
CO2 emission standards, i.e., some manufacturers may have
made public statements about higher mpg levels in the future in part
because of the expectation of higher future standards.
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\336\ With the notable exception of manufacturers who only
market electric vehicles or other limited product lines.
\337\ Oates, Wallace E., Paul R. Portney, and Albert M.
McGartland. ``The Net Benefits of Incentive-Based Regulation: A Case
Study of Environmental Standard Setting.'' American Economic Review
79(5) (December 1989): 1233-1242.
\338\ The average, fleetwide ``laboratory'' or ``unadjusted''
fuel economy value for MY 2010 is 28.3 mpg (see Light-Duty
Automotive Technology, Carbon Dioxide Emissions, and Fuel Economy
Trends: 1975 Through 2010, November 2010, available at http://www.epa.gov/otaq/fetrends.htm), 6-7 mpg less than the 34-35 mpg
levels necessary to meet the EPA GHG and NHTSA CAFE levels in MY
2016.
\339\ For example, Hyundai has made a public commitment to
achieve 50 mpg by 2025.
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All estimates of actual GHG emissions and fuel economy performance
in 2016 or other future years are projections, and it is plausible that
actual GHG emissions and fuel economy performance in 2016 and later
years, absent more stringent standards, could be worse than projected
if there are shifts from car market share to truck market share, or to
higher footprint levels. For example, average fuel economy performance
levels decreased over the period from 1986-2003 even as car CAFE
standards were stable and truck CAFE levels rose slightly.\340\ On the
other hand, it is also possible that future GHG emissions and fuel
economy performance could be better than MY2016 levels if there are
shifts from trucks to cars, or to lower footprint levels. While EPA has
not performed a quantified sensitivity assessment for this proposal,
EPA believes that a reasonable range for a sensitivity analysis would
evaluate over or under compliance on the order of a few percent which
EPA projects would have, at most, a small impact on projected program
costs and benefits.
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\340\ See Regulatory Impact Analysis, Chapter 3.
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Based on this assessment, the EPA reference case fleet is estimated
through the target curves defined in the MY 2016 rulemaking applied to
the projected MYs 2017-2025 fleet.\341\ As in the previous rulemaking,
EPA assumes that manufacturers make use of 10.2 grams of air
conditioning credits on cars and 11.5 on light trucks, or an average of
approximately 11 grams on the U.S. fleet and the technology for doing
so is included in the reference case (Section III.C).
---------------------------------------------------------------------------
\341\ 75 FR at 25686.
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b. Control Scenarios Modeled
For the control scenario, EPA modeled the proposed standard curves
discussed in Section III.B, as well as the alternative scenarios
discussed in III.D.6. Other flexibilities are accounted for in the
analysis. The air conditioning credits modeled are discussed in
III.D.2. Air conditioning credits (both leakage and efficiency) are
included in the cost and technology analysis described below. The
compliance value of 0 g/mi for PHEVs and EVs are also included.
However, off-cycle credits, PH/EV multipliers through MY 2021, pickup
truck credits, flexible fuel, and carry forward/back credits are not
included explicitly in the cost analysis. These flexibilities will
offer the manufacturers more compliance options. Moreover, the overall
cost analysis includes small volume manufacturers in the fleet, which
would have company specific standards assuming this part of the
proposal is finalized (see section III.C). As we expect all of these
flexibilities together to only have a small impact on the fleet
compliance costs on average, we will re-evaluate including them in the
final rule analysis.
c. Vehicle Groupings Used
In order to create future technology projections and enable
compliance with the modeled standards, EPA aggregates vehicle sales by
a combination of manufacturer, vehicle platform, and engine design for
the OMEGA model. As
[[Page 75032]]
discussed above, manufacturers implement major design changes at
vehicle redesign and tend to implement these changes across a vehicle
platform (such as large SUV, mid-size SUV, large automobile, etc) at a
given manufacturing plant. Because the cost of modifying the engine
depends on the valve train design (such as SOHC, DOHC, etc.), the
number of cylinders and in some cases head design, the vehicle sales
are broken down beyond the platform level to reflect relevant engine
differences. The vehicle groupings are shown in Table III-19.
[[Page 75033]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.076
[[Page 75034]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.077
2. What are the Effectiveness and Costs of CO2-Reducing
Technologies?
EPA and NHTSA worked together to develop information on the
effectiveness and cost of most CO2-reducing and fuel
economy-improving technologies. This joint work is reflected in Chapter
3 of the draft Joint TSD and in Section II.D of this preamble. The work
on technology cost and effectiveness also includes maximum penetration
rates, or ``caps'' for the OMEGA model. These caps are an important
input to OMEGA that capture the agencies' analysis concerning the rate
at which technologies can be added to the fleet (see Chapter 3.5 of the
draft joint TSD for more detail). This preamble section, rather than
repeating those details, focuses upon EPA-only technology assumptions,
specifically, those relating to air conditioning refrigerant.
EPA expects all manufacturers will choose to use AC improvement
credit opportunities as a strategy for complying with the
CO2 standards, and has set the stringency of the proposed
standards accordingly (see section II.F above). EPA estimates that the
level of the credits earned will increase from 2017 (13 grams/mile) to
2021 (21 grams/mile) as more vehicles in the fleet convert to use of
the new alternative refrigerant.\342\ By 2021, we project that 100% of
the MY 2021 fleet will be using alternative refrigerants, and that
credits will remain constant on a car and truck basis until 2025. Note
from the table below that costs then decrease from 2021 to 2025 due to
manufacturer learning as discussed in Section II of this preamble and
in Chapter 3 of the draft joint TSD. A more in-depth discussion of
feasibility and availability of low GWP alternative refrigerants, can
be found in Section III.C of the Preamble.
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\342\ See table in III.B.
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[[Page 75035]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.078
Additionally, by MY 2019, EPA estimates that 100% of the A/C
efficiency improvements will by fully phased-in. However 85% of these
costs are already in the reference fleet, as this is the level of
penetration assumed in the 2012-2016 final rule. The penetration of A/C
costs for this proposal can be found in Chapter 5 of the draft joint
TSD.
3. How were technologies combined into ``Packages'' and what is the
cost and effectiveness of packages?
Individual technologies can be used by manufacturers to achieve
incremental CO2 reductions. However, as discussed
extensively in the MYs 2012-2016 Rule, EPA believes that manufacturers
are more likely to bundle technologies into ``packages'' to capture
synergistic aspects and reflect progressively larger CO2
reductions with additions or changes to any given package. In this
manner, and consistent with the concept of a redesign cycle,
manufacturers can optimize their available resources, including
engineering, development, manufacturing and marketing activities to
create a product with multiple new features. Therefore, the approach
taken here is to group technologies into packages of increasing cost
and effectiveness.
EPA built unique technology packages for each of 19 ``vehicle
types,'' which, as in the MYs 2012-2016 rule and the Interim Joint TAR,
provides sufficient resolution to represent the technology of the
entire fleet. This was the result of analyzing the existing light duty
fleet with respect to vehicle size and powertrain configurations. All
vehicles, including cars and trucks, were first distributed based on
their relative size, starting from compact cars and working upward to
large trucks. Next, each vehicle was evaluated for powertrain,
specifically the engine size (I4, V6, and V8) then by valvetrain
configuration (DOHC, SOHC, OHV), and finally by the number of valves
per cylinder. For purposes of calculating some technology costs and
effectiveness values, each of these 19 vehicle types is mapped into one
of seven classes of vehicles: Subcompact, Small car, Large car,
Minivan, Minivan with towing, Small truck, and Large truck.\343\ We
believe that these seven vehicle classes, along with engine cylinder
count, provide adequate representation for the cost basis associated
with most technology application. Note also that these 19 vehicle types
span the range of vehicle footprints--smaller footprints for smaller
vehicles and larger footprints for larger vehicles--which served as the
basis for the 2012-2016 GHG standards and the standards in this
proposal. A detailed table showing the 19 vehicle types, their baseline
engines and their
[[Page 75036]]
descriptions is contained in Table III-19 and in Chapter 1 of EPA's
draft RIA.
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\343\ Note that, for the current assessment and representing an
update since the 2010 TAR, EPA has created a new vehicle class
called ``minivan with towing'' which allows for greater
differentiation of costs for this popular class of vehicles (such as
the Ford Edge, Honda Odyssey, Jeep Grand Cherokee).
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Within each of the 19 vehicle types, multiple technology packages
were created in increasing technology content resulting in increasing
effectiveness. As stated earlier, with few exceptions, each package is
meant to provide equivalent driver-perceived performance to the
baseline package. Note that we refer throughout this discussion of
package building to a ``baseline'' vehicle or a ``baseline'' package.
This should not be confused with the baseline fleet, which is the fleet
of roughly 16 million 2008MY individual vehicles comprised of over
1,100 vehicle models. In this discussion, when we refer to ``baseline''
vehicle we refer to the ``baseline'' configuration of the given vehicle
type. So, we have 19 baseline vehicles in the context of building
packages. Each of those 19 baseline vehicles is equipped with a port
fuel injected engine and a 4 speed automatic transmission. The
valvetrain configuration and the number of cylinders changes for each
vehicle type in an effort to encompass the diversity in the 2008
baseline fleet as discussed above. In short, while the baseline vehicle
that defines the vehicle type is relevant when discussing the package
building process, the baseline and reference case fleets of real
vehicles are not relevant to the discussion here. We describe this in
more detail in Chapter 1 of EPA's draft RIA.
To develop a set of packages as OMEGA inputs, EPA builds packages
consisting of every legitimate permutation of technology available,
subject to constraints.\344\ This ``preliminary-set'' of packages
consists of roughly 2,000 possible packages of technologies for each of
19 vehicle types, or nearly 40,000 packages in all. The cost of each
package is determined by adding the cost of each individual technology
contained in the package for the given year of interest. The
effectiveness of each package is determined in a more deliberate
manner; one cannot simply add the effectiveness of individual
technologies to arrive at a package-level effectiveness because of the
synergistic effects of technologies when grouped with other
technologies that seek to improve the same or similar efficiency loss
mechanism. As an example, the benefits of the engine and transmission
technologies can usually be combined multiplicatively,\345\ but in some
cases, the benefit of the transmission-related technologies overlaps
with the engine technologies. This occurs because the transmission
technologies shift operation of the engine to more efficient locations
on the engine map by incorporating more ratio selections and a wider
ratio span into the transmissions. Some of the engine technologies have
the same goal, such as cylinder deactivation, advanced valvetrains, and
turbocharging. In order to account for this overlap and avoid over-
estimating emissions reduction effectiveness, EPA uses an engineering
approach known as the lumped-parameter technique. The results from this
approach were then applied directly to the vehicle packages. The
lumped-parameter technique is well documented in the literature, and
the specific approach developed by EPA is detailed in Chapter 3
(Section 3.3.2) of the draft joint TSD as well as Chapter 1 of EPA's
draft RIA.
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\344\ Example constraints include the requirement for
stoichiometric gasoline direct injection on every turbocharged and
downsized engine and/or any 27 bar BMEP turbocharged and downsized
engine must also include cooled EGR. Some constraints are the result
of engineering judgment while others are the result of effectiveness
value estimates which are tied to specific combinations of
technologies.
\345\ For example, if an engine technology reduces
CO2 emissions by five percent and a transmission
technology reduces CO2 emissions by four percent, the
benefit of applying both technologies is 8.8 percent (100% - (100% -
4%) * (100% - 5%)).
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Table III-21 presents technology costs for a subset of the more
prominent technologies in our analysis (note that all technology costs
are presented in Chapter 3 of the draft Joint TSD and in Chapter 1.2 of
EPA's draft RIA). Table III-21 includes technology costs for a V6 dual
overhead cam midsize or large car and a V8 overhead valve large pickup
truck. This table is meant to illustrate how technology costs are
similar and/or different for these two large selling vehicle classes
and how the technology costs change over time due to learning and
indirect cost changes as described in section II.D of this preamble and
at length in Chapter 3.2 of the draft Joint TSD. Note that these costs
are not package costs but, rather, individual technology costs. We
present package costs for the V6 midsize or large car in Table III-22,
below.
[[Page 75037]]
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[[Page 75038]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.080
Table III-22 presents the cost and effectiveness values from a
2025MY master-set of packages used in the OMEGA model for EPA's vehicle
type 5, a midsize or large car class equipped with a V6 engine. Similar
packages were generated for each of the 19 vehicle types and the costs
and effectiveness estimates for each of those packages are discussed in
detail in Chapter 1 of EPA's draft RIA.
As detailed in Chapter 1 of EPA's draft RIA, this preliminary-set
of packages is then ranked according to technology application ranking
factors (TARFs) to eliminate packages that are not as cost-effective as
others.\346\ The result of this TARF ranking process is a ``ranked-
set'' of roughly 500 packages for use as OMEGA inputs, or roughly 25
per vehicle type. EPA prepares a ranked set of packages for any MY in
which OMEGA is run,\347\ the initial packages represent what we believe
a manufacturer will most likely implement on all vehicles, including
lower rolling resistance tires, low friction lubricants, engine
friction reduction, aggressive shift logic, early torque converter
lock-up, improved electrical accessories, and low drag brakes (to the
extent not reflected in the baseline vehicle).\348\ Subsequent packages
include gasoline direct injection, turbocharging and downsizing, and
more advanced transmission technologies such as six and eight speed
dual-clutch transmissions and 6 and 8 speed automatic transmissions.
The most technologically advanced packages within a vehicle type
include the hybrids, plug-in hybrids and electric vehicles. Note that
plug-in hybrid and electric vehicle packages are only modeled for the
non-towing vehicle types, in order to better maintain utility. We
request comment on this decision and whether or not we should perhaps
consider plug-in hybrids for towing vehicle types.
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\346\ The Technology Application Ranking Factor (TARF) is
discussed further in III.D.5.
\347\ Note that a ranked-set of package is generated for any
year for which OMEGA is run due to the changes in costs and maximum
penetration rates. EPA's draft RIA chapter 3 contains more details
on the OMEGA modeling and draft Joint TSD Chapter 3 has more detail
on both costs changes over time and the maximum penetration limits
of certain technologies.
\348\ When making reference to low friction lubricants, the
technology being referred to is the engine changes and possible
durability testing that would be done to accommodate the low
friction lubricants, not the lubricants themselves.
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[GRAPHIC] [TIFF OMITTED] TP01DE11.082
[[Page 75041]]
4. How does EPA project how a manufacturer would decide between options
to improve CO2 performance to meet a fleet average standard?
As discussed, there are many ways for a manufacturer to reduce
CO2-emissions from its vehicles. A manufacturer can choose
from a myriad of CO2 reducing technologies and can apply one
or more of these technologies to some or all of its vehicles. Thus, for
a variety of levels of CO2 emission control, there are an
almost infinite number of technology combinations which produce a
desired CO2 reduction. As noted earlier, EPA used the same
model used in the MYs 2012-2016 Rule, the OMEGA model, in order to make
a reasonable estimate of how manufacturers will add technologies to
vehicles in order to meet a fleet-wide CO2 emissions level.
EPA has described OMEGA's specific methodologies and algorithms
previously in the model documentation,\349\ makes the model publically
available on its Web site,\350\ and has recently peer reviewed the
model.\351\
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\349\ Previous OMEGA documentation for versions used in MYs
2012-2016 Final Rule (EPA-420-B-09-035), Interim Joint TAR (EPA-420-
B-10-042).
\350\ http://www.epa.gov/oms/climate/models.htm.
\351\ EPA-420-R-09-016, September 2009.
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The OMEGA model utilizes four basic sets of input data. The first
is a description of the vehicle fleet. The key pieces of data required
for each vehicle are its manufacturer, CO2 emission level,
fuel type, projected sales and footprint. The model also requires that
each vehicle be assigned to one of the 19 vehicle types, which tells
the model which set of technologies can be applied to that vehicle.
(For a description of how the 19 vehicle types were created, see
Section III.D.3 above.) In addition, the degree to which each baseline
vehicle already reflects the effectiveness and cost of each available
technology must also be input. This avoids the situation, for example,
where the model might try to add a basic engine improvement to a
current hybrid vehicle. Except for this type of information, the
development of the required data regarding the reference fleet was
described in Section III.D.1 above and in Chapter 1 of the Joint TSD.
The second type of input data used by the model is a description of
the technologies available to manufacturers, primarily their cost and
effectiveness. This information was described above as well as in
Chapter 3 of the draft Joint TSD and Chapter 1 of EPA's draft RIA. In
all cases, the order of the technologies or technology packages for a
particular vehicle type is determined by the model user prior to
running the model. The third type of input data describes vehicle
operational data, such as annual vehicle scrappage rates and mileage
accumulation rates, and economic data, such as fuel prices and discount
rates. These estimates are described in Section II.E above, Section
III.H below and Chapter 4 of the Joint TSD.
The fourth type of data describes the CO2 emission
standards being modeled. These include the MY 2016 standards, proposed
MY 2021 and proposed MY 2025 standards. As described in more detail
below, the application of A/C technology is evaluated in a separate
analysis from those technologies which impact CO2 emissions
over the 2-cycle test procedure. Thus, for the percent of vehicles that
are projected to achieve A/C related reductions, the CO2
credit associated with the projected use of improved A/C systems is
used to adjust the final CO2 standard which will be
applicable to each manufacturer to develop a target for CO2
emissions over the 2-cycle test which is assessed in our OMEGA
modeling. As an example, on an industry wide basis, EPA projects that
manufacturers will generate 11 g/mi of A/C credit in 2016. Thus, the
2016 CO2 target in OMEGA was approximately eleven grams less
stringent for each manufacturer than predicted by the curves. Similar
adjustments were made for the control cases (i.e., the A/C credits
allowed by the rule are accounted for in the standards), but for a
larger amount of A/C credit (approximately 25 grams).
As mentioned above for the market data input file utilized by
OMEGA, which characterizes the vehicle fleet, our modeling accounts for
the fact that many 2008 MY vehicles are already equipped with one or
more of the technologies discussed in Section III.D.2 above. Because of
the choice to apply technologies in packages, and because 2008 vehicles
are equipped with individual technologies in a wide variety of
combinations, accounting for the presence of specific technologies in
terms of their proportion of package cost and CO2
effectiveness requires careful, detailed analysis.
Thus, EPA developed a method to account for the presence of the
combinations of applied technologies in terms of their proportion of
the technology packages. This analysis can be broken down into four
steps
The first step in the updated process is to break down the
available GHG control technologies into five groups: (1) Engine-
related, (2) transmission-related, (3) hybridization, (4) weight
reduction and (5) other. Within each group, each individual technology
was given a ranking which generally followed the degree of complexity,
cost and effectiveness of the technologies within each group. More
specifically, the ranking is based on the premise that a technology on
a 2008 baseline vehicle with a lower ranking would be replaced by one
with a higher ranking which was contained in one of the technology
packages which we included in our OMEGA modeling. The corollary of this
premise is that a technology on a 2008 baseline vehicle with a higher
ranking would be not be replaced by one with an equal or lower ranking
which was contained in one of the technology packages which we chose to
include in our OMEGA modeling. This ranking scheme can be seen in an
OMEGA pre-processor (the TEB/CEB calculation macro), available in the
docket.
In the second step of the process, these rankings were used to
estimate the complete list of technologies which would be present on
each baseline vehicle after the application of a technology package. In
other words, this step indicates the specific technology on each
baseline vehicle after a package has been applied to it. EPA then used
the lumped parameter model to estimate the total percentage
CO2 emission reduction associated with the technology
present on the baseline vehicle (termed package 0), as well as the
total percentage reduction after application of each package. A similar
approach was used to determine the total cost of all of the technology
present on the baseline vehicle and after the application of each
applicable technology package.
The third step in this process is to account for the degree of each
technology package's incremental effectiveness and incremental cost is
affected by the technology already present on the baseline vehicle. In
this step, we calculate the degree to which a technology package's
effectiveness is already present on the baseline vehicle, and produce a
value for each package termed the technology effectiveness basis, or
TEB. The degree to which a technology package's incremental cost is
reduced by technology already present on the baseline vehicle is termed
the cost effectiveness basis, or CEB, in the OMEGA model. The equations
for calculating these values can be seen in RIA chapter 3.
As described in Section III.D.3 above, technology packages are
applied to groups of vehicles which generally represent a single
vehicle platform and which are equipped with a single engine size
(e.g., compact cars with four cylinder engine produced by Ford). These
groupings are described in Table
[[Page 75042]]
III-19. Thus, the fourth step is to combine the fractions of the CEB
and TEB of each technology package already present on the individual MY
2008 vehicle models for each vehicle grouping. For cost, percentages of
each package already present are combined using a simple sales-
weighting procedure, since the cost of each package is the same for
each vehicle in a grouping. For effectiveness, the individual
percentages are combined by weighting them by both sales and base
CO2 emission level. This appropriately weights vehicle
models with either higher sales or CO2 emissions within a
grouping. Once again, this process prevents the model from adding
technology which is already present on vehicles, and thus ensures that
the model does not double count technology effectiveness and cost
associated with complying with the modeled standards.
Conceptually, the OMEGA model begins by determining the specific
CO2 emission standard applicable for each manufacturer and
its vehicle class (i.e., car or truck). Since the proposal allows for
averaging across a manufacturer's cars and trucks, the model determines
the CO2 emission standard applicable to each manufacturer's
car and truck sales from the two sets of coefficients describing the
piecewise linear standard functions for cars and trucks (i.e., the
respective car and truck curves) in the inputs, and creates a combined
car-truck standard. This combined standard considers the difference in
lifetime VMT of cars and trucks, as indicated in the proposed
regulations which govern credit trading between these two vehicle
classes (which reflect the final 2012-2016 rules on this point).\352\
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\352\ The analysis for the control cases in this proposal was
run with slightly different lifetime VMT estimates than those
proposed in the regulation. The impact on the cost estimates is
small and varies by manufacturer.
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As noted above, EPA estimated separately the cost of the improved
A/C systems required to generate the credit. In the reference case
fleet that complies with the MY 2016 standards, 85% of vehicles are
modeled with improved A/C efficiency and leakage prevention technology.
The model then works with one manufacturer at a time to add
technologies until that manufacturer meets its applicable proposed
standard. The OMEGA model can utilize several approaches to determining
the order in which vehicles receive technologies. For this analysis,
EPA used a ``manufacturer-based net cost-effectiveness factor'' to rank
the technology packages in the order in which a manufacturer is likely
to apply them. Conceptually, this approach estimates the cost of adding
the technology from the manufacturer's perspective and divides it by
the mass of CO2 the technology will reduce. One component of
the cost of adding a technology is its production cost, as discussed
above. However, it is expected that new vehicle purchasers value
improved fuel economy since it reduces the cost of operating the
vehicle. Typical vehicle purchasers are assumed to value the fuel
savings accrued over the period of time which they will own the
vehicle, which is estimated to be roughly five years. It is also
assumed that consumers discount these savings at the same rate as that
used in the rest of the analysis (3 or 7 percent).\353\ Any residual
value of the additional technology which might remain when the vehicle
is sold is not considered. The CO2 emission reduction is the
change in CO2 emissions multiplied by the percentage of
vehicles surviving after each year of use multiplied by the annual
miles travelled by age.
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\353\ While our costs and benefits are discounted at 3% or 7%,
the decision algorithm (TARF) used in OMEGA was run at a discount
rate of 3%. Given that manufacturers must comply with the standard
regardless of the discount rate used in the TARF, this has little
impact on the technology projections shown here.
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Given this definition, the higher priority technologies are those
with the lowest manufacturer-based net cost-effectiveness value
(relatively low technology cost or high fuel savings leads to lower
values). Because the order of technology application is set for each
vehicle, the model uses the manufacturer-based net cost-effectiveness
primarily to decide which vehicle receives the next technology
addition. Initially, technology package 1 is the only one
available to any particular vehicle. However, as soon as a vehicle
receives technology package 1, the model considers the
manufacturer-based net cost-effectiveness of technology package
2 for that vehicle and so on. In general terms, the equation
describing the calculation of manufacturer-based cost effectiveness is
as follows:
[GRAPHIC] [TIFF OMITTED] TP01DE11.083
Where:
CostEffManuft = Manufacturer-Based Cost Effectiveness (in
dollars per kilogram CO2),
TechCost = Marked up cost of the technology (dollars),
FS = Difference in fuel consumption due to the addition of
technology times fuel price and discounted over the payback period,
or the number of years of vehicle use over which consumers value
fuel savings when evaluating the value of a new vehicle at time of
purchase
dCO2 = Difference in CO2 emissions (g/mile)
due to the addition of technology
VMTregulatory = the statutorily defined VMT
EPA describes the technology ranking methodology and manufacturer-
based cost effectiveness metric in greater detail in the OMEGA
documentation.\354\
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\354\ OMEGA model documentation. EPA-420-B-10-042.
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When calculating the fuel savings in the TARF equation, the full
retail price of fuel, including taxes is used. While taxes are not
generally included when calculating the cost or benefits of a
regulation, the net cost component of the manufacturer-based net cost-
effectiveness equation is not a measure of the social cost of this
proposed rule, but a measure of the private cost, (i.e., a measure of
the vehicle purchaser's willingness to pay more for a vehicle with
higher fuel efficiency). Since vehicle operators pay the full price of
fuel, including taxes, they value fuel costs or savings at this level,
and the manufacturers will consider this when choosing among the
technology options.\355\
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\355\ This definition of manufacturer-based net cost-
effectiveness ignores any change in the residual value of the
vehicle due to the additional technology when the vehicle is five
years old. Based on historic used car pricing, applicable sales
taxes, and insurance, vehicles are worth roughly 23% of their
original cost after five years, discounted to year of vehicle
purchase at 7% per annum. It is reasonable to estimate that the
added technology to improve CO2 level and fuel economy
will retain this same percentage of value when the vehicle is five
years old. However, it is less clear whether first purchasers, and
thus, manufacturers consider this residual value when ranking
technologies and making vehicle purchases, respectively. For this
proposal, this factor was not included in our determination of
manufacturer-based net cost-effectiveness in the analyses.
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The values of manufacturer-based net cost-effectiveness for
specific
[[Page 75043]]
technologies will vary from vehicle to vehicle, often substantially.
This occurs for three reasons. First, both the cost and fuel-saving
component cost, ownership fuel-savings, and lifetime CO2
effectiveness of a specific technology all vary by the type of vehicle
or engine to which it is being applied (e.g., small car versus large
truck, or 4-cylinder versus 8-cylinder engine). Second, the
effectiveness of a specific technology often depends on the presence of
other technologies already being used on the vehicle (i.e., the dis-
synergies). Third, the absolute fuel savings and CO2
reduction of a percentage an incremental reduction in fuel consumption
depends on the CO2 level of the vehicle prior to adding the
technology. Chapter 1 of EPA's draft RIA contains further detail on the
values of manufacturer-based net cost-effectiveness for the various
technology packages.
5. Projected Compliance Costs and Technology Penetrations
The following tables present the projected incremental costs and
technology penetrations for the proposed program. Overall projected
cost increases are $734 in MY 2021 and $1946 in MY 2025. Relative to
the reference fleet complying with of MY 2016 standards, we see
significant increases in advanced transmission technologies such as the
high efficiency gear box and 8 speed transmissions, as well as more
moderate increase in turbo downsized, cooled EGR 24 bar BMEP engines.
In the control case, 15 percent of the MY 2025 fleet is projected to be
a strong P2 hybrid as compared to 5% in the 2016 reference case.
Similarly, 3 percent of the MY 2025 fleet are projected to be electric
vehicles while less than 1 percent are projected to be electric
vehicles in the reference case. EPA notes that we have projected one
potential compliance path for each company and the industry as a
whole--this does not mean other potential technology penetrations are
not possible, in fact, it is likely that each firm will of course plot
their own future course on how to comply. For example, while we show
relatively low levels of EV and PHEV technologies may be used to meet
the proposed standards, several firms have announced plans to
aggressively pursue EV and PHEV technologies and thus the actual
penetration of those technologies may turn out to be much higher than
the prediction we present here.
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6. How does the technical assessment support the proposed
CO2 standards as compared to the alternatives has EPA
considered?
a. What are the targets and achieved levels for the fleet in this
proposal?
In this section EPA analyzes the proposed standards alongside
several potential alternative GHG standards.
Table III-28 includes a summary of the proposed standards and the
four alternatives considered by EPA for this notice. In this table and
for the majority of the data presented in this section, EPA focuses on
two specific model years in the 2017-2025 time frame addressed by this
proposal. For the purposes of considering alternatives, EPA assessed
these two specific years as being reasonably separated in time in order
to evaluate a range of meaningfully different standards, rather than
analyzing alternatives for each individual model year. After discussing
the reasons for selecting the proposed standards rather than any of the
alternatives, EPA will describe the specific standard phase-in schedule
for the proposal. Table III-28 presents the projected reference case
targets for the fleet in 2021 and 2025, that is the estimated industry
wide targets that would be required for the projected fleet in those
years by the MY 2016 standards.\357\ The alternatives, like the
proposed standards, account for projected use of A/C related credits.
They represent the average targets for cars and trucks projected for
the proposed standards and four alternative standards. They do not
represent the manner in which manufacturers are projected to achieve
compliance with these targets, which includes the ability to transfer
credits to and from the car and truck fleets. That is discussed later.
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\357\ The reference case targets for 2021 and 2025 may be
different even though the footprint based standards are identical
(the 2016 curves). This is because the fleet distribution of cars
and trucks may change in the intervening years thus changing the
targets in 2021 and 2025.
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[[Page 75052]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.092
Alternative 1 and 2 are focused on changes in the level of
stringency for just light-duty trucks: Alternative 1 is 20 grams/mile
CO2 less stringent (higher) in 2021 and 2025, and
Alternative 2 is 20 grams/mile CO2 more stringent (lower) in
2021 and 2025. Alternative 3 and 4 are focused on changes in the level
of stringency for just passenger cars: Alternative 3 is 20 grams/mile
CO2 less stringent (higher) in 2021 and 2025, and
Alternative 4 is 20 grams/mile CO2 more stringent (lower) in
2021 and 2025. When combined with the sales projections for 2021 and
2025, these alternatives span fleet wide targets with a range of 187-
213 g/mi CO2 in 2021 (equivalent to a range of 42-48 mpge if
all improvements were made with fuel economy technologies) and a range
of 150-177 g/mi CO2 in 2025 in 2025 (equivalent to a range
of 50-59 mpg if all improvements were made with fuel economy
technologies).
Using the OMEGA model, EPA evaluated the proposed standards and
each of the alternatives in 2021 and in 2025. It is worth noting that
although Alternatives 1 and 2 consider different truck footprint curves
compared to the proposal and Alternatives 3 and 4 evaluate different
car footprint curves compared to the proposal, in all cases EPA
evaluated the alternatives by modeling both the car and truck footprint
curves together (which achieve the fleet targets shown in Table III-28)
as this is how manufacturers would view the future standards given the
opportunity to transfer credits between cars and trucks under the GHG
program.\358\ A manufacturer's ability to transfer GHG credits between
its car and truck fleets without limit does have the effect of muting
the ``truck'' focused and ``car'' focused nature of the alternatives
EPA is evaluating. For example, while Alternative 1 has truck standards
[[Page 75053]]
projected in 2021 and 2025 to be 20 grams/mile less stringent than the
proposed truck standards and the same car standards as the proposed car
standards, individual firms may over comply on trucks and under-comply
on cars (or vice versa) in order to meet Alternative 1 in a cost
effective manner from each company's perspective. EPA's modeling of
single manufacturer fleets reflects this flexibility, and appropriately
so given that it reflects manufacturers' expected response.
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\358\ The curves for the alternatives were developed using the
same methods as the proposed curves, however with different targets.
Thus, just as in the proposed curves, the car and truck curves
described in TSD 2 were ``fanned'' up or down to determine the
curves of the alternatives.
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Table III-29 shows the projected target and projected achieved
levels in 2025 for the proposed standards. This accounts for a
manufacturer's ability to transfer credits to and from cars and trucks
to meet a manufacturer's car and truck targets.
[[Page 75054]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.093
Similar tables for each of the alternatives for 2025 and for the
alternatives and the proposal for 2021 are contained in Chapter 3 of
EPA's draft RIA. With the proposed standards and for Alternatives 1 and
2, all
[[Page 75055]]
companies are projected to be able to comply both in 2021 and 2025,
with the with the exception of Ferrari, which in each case falls 9 g/mi
short of its projected fleet wide obligation in 2025.\359\ In
Alternatives 3 and 4, where the car stringency varies, all companies
are again projected to comply with the exception of Ferrari, which
complies under Alternative 3, but has a 30 gram shortfall under
Alternative 4. This level of compliance was not the case for the 2016
standards from the previous rule. The primary reason for this result is
the penetration of more efficient technologies beyond 2016. As
described earlier, many technologies projected as not to be available
by MY 2016 or whose penetration was limited due to lead time issues are
projected to be available or available at greater penetration rates in
the 2017-2025 timeframe, especially given two more redesign cycles for
the industry on average.
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\359\ Note that Ferrari is shown as a separate entity in the
table above but could be combined with other Fiat-owned companies
for purposes of GHG compliance at the manufacturer's discretion.
Also, in Section III.B., EPA is requesting comment on the concept of
allowing companies that are able to demonstrate ``operational
independence'' to be eligible for SVM alternative standards.
However, the costs shown above are based on Ferrari meeting the
primary program standards.
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b. Why is the Relative Rate of Car Truck Stringency Appropriate?
Table III-29 illustrates the importance of car-truck credit
transfer for individual firms. For example, the OMEGA model projects
for the proposed standards that in 2025, Daimler would under comply for
trucks by 22 g/mile but over comply in their car fleet by 8 g/mi in
order to meet their overall compliance obligation, while for Kia the
OMEGA model projects that under the proposed standards Kia's truck
fleet would over comply by 10 g/mi and under comply in their car fleet
by 3 g/mi in order to meet their compliance obligations. However, for
the fleet as a whole, we project only a relatively small degree of net
credit transfers from the truck fleet to the car fleet.
Table III-23 shows that the average costs for cars and trucks are
also nearly equivalent for 2021 and 2025. For MY 2021, the average cost
to comply with the car standards is $718, while it is $764 for trucks.
For MY 2025, the average cost to comply with the car standards is
$1,942, while it is $1,954 for trucks. These results are highly
consistent with the small degree of net projected credit transfer
between cars and trucks.
The average cost for complying with the truck and car standards are
similar, even though the level of stringency for trucks is increasing
at a slower rate than for cars. As described in Section I.B.2 of the
preamble, the proposed car standards are decreasing (in CO2)
at a rate of 5% per year from MYs 2017-2025, while the proposed truck
standards are decreasing at a rate of 3.5% per year on average from MYs
2017-2021, then 5% per year thereafter till 2025. Given this difference
in percentage rates, the close similarity in average cost stems from
the fact that it is more costly to add the technologies to trucks (in
general) than to cars as described in Chapter 1 of the draft RIA.
Moreover, some technologies are not even available for towing trucks.
These include EVs, PHEVs, Atkinson Cycle engines (matched with HEVs),
and DCTs--the latter two are relatively cost effective. Together these
result in a decrease in effectiveness potential for the heavier towing
trucks compared to non-towing trucks and cars. In addition,, there is
more mass reduction projected for these vehicles, but this comes at
higher cost as well, as the cost per pound for mass reduction goes up
with higher levels of mass reduction (that is, the cost increase curves
upward rather than being linear). As described in greater detail in
Chapter 2 of the joint TSD, these factors help explain the reason EPA
and NHTSA are proposing to make the truck curve steeper relative to the
2016 curve, thus resulting in a truck curve that is ``more parallel''
to cars than the 2016 truck curve.
Taken together, our analysis shows that under the proposed
standards, there is relatively little net trading between car and
trucks; average costs for compliance with cars is similar to that of
trucks in MY 2021 as well as MY 2025; and it is more costly to add
technologies to trucks than to cars. These facts corroborate the
reasonableness for increasing the slope of the truck curve. These
observations also lead us to the conclusion that (at a fleet level)
starting from MYs 2017-2021, the slower rate of increase for trucks
compared to cars (3.5% compared to 5% per year), and the same rate of
increase (5% per year) for both cars and trucks for MY 2022-2025
results in car and truck standards that reflect increases in stringency
over time that are comparable and consistent. There are no indications
that either the truck or car standards are leading manufacturers to
choose technology paths that lead to significant over or under
compliance for cars or trucks, on an industry wide level. E.g., there
is no indication that on average the proposed car standards would lead
manufacturers to consistently under or over comply with the car
standard in light of the truck standard, or vice versa. A consistent
pattern across the industry of manufacturers choosing to under or over
comply with a car or trucks standard could indicate that the car or
truck standard should be evaluated further to determine if one was more
or less stringent than might be appropriate in light of the technology
choices available to manufacturers and their costs. As shown above,
that is not the case for the proposed car and truck standards. However,
EPA did evaluate a set of alternative standards that reflect separately
increasing or decreasing the stringency of the car and truck standards,
as discussed below.
c. What are the costs and advanced technology penetration rates for the
alternative standards in relation to the proposed standards?
Below we discuss results for the proposed car and truck standards
compared to the truck alternatives evaluated (Alternatives 1 and 2),
and then discuss the proposed car and truck standards compared to the
car alternatives (Alternatives 3 and 4).
Table III-30 presents our projected per-vehicle cost for the
average car, truck and for the fleet in model year 2021 and 2025 for
the proposal and for Alternatives 1 and 2. All costs are relative to
the reference case (i.e. the fleet with technology added to meet the
2016 MY standards). As can be seen, even though only the truck
standards vary among these three scenarios, in each case the projected
average car and truck costs vary as a result of car-truck credit
transfer by individual companies. Table III-30 shows that compared to
the proposal, Alternative 1 (with a 2021 and 2025 truck target 20 g/
mile less stringent, or 20 g/mile greater, than the proposal) is $281
per vehicle less than the proposal in 2021 and $430 per vehicle less
than the proposal in 2025. Alternative 2 (with a 2021 and 2025 truck
target 20g/mile more stringent, or 20 g/mile less, than the proposal)
is $343 per vehicle more than the proposal in 2021 and $516 per vehicle
more than the proposal in 2025.
Note that while the car and truck costs are nearly equivalent for
Alternative 2 in 2021 and 2025, cars are over complying on average by 7
g/mi, while trucks are under complying by 11 g/mi, thus indicating
significant flow of credits from cars to trucks.\360\ The situation is
reversed in Alternative 1, where cars are under complying on average by
9 g/mi and trucks are over
[[Page 75056]]
complying by 16 g/mi, implying significant flow of credits from truck
to cars.
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\360\ These detailed tables are in Chapter 3 of EPA's draft RIA.
[GRAPHIC] [TIFF OMITTED] TP01DE11.095
Table III-31 presents the per-vehicle cost estimates in MY 2021 by
company for the proposal, Alternative 1 and Alternative 2. In general,
for most of the companies our projected results show the same trends as
for the industry as a whole.
[[Page 75057]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.096
Table III-32 presents the per-vehicle cost estimates in MY 2025 by
company for the proposal, Alternative 1 and Alternative 2. In general,
for most of the companies our projected results show the same trends as
for the industry as a whole, with Alternative 1 on the order of $200 to
$600 per vehicle less expensive then the proposal, and Alternative 2 on
the order of $200 to $800 per vehicle more expensive. For the fleet as
a whole, the average cost for Alternative 1 is $430 less costly, while
Alternative 2 is $516 more costly. Thus the incremental average cost is
higher for the more stringent alternative than for an equally less
stringent alternative standard. This is not a surprise as more
technologies must be added to vehicles to meet tighter standards, and
these technologies increase in cost in a non-linear fashion.
[[Page 75058]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.097
The previous tables present the costs for the proposal and
alternatives 1 and 2 at both the industry and company level. In
addition to costs, another key is the technology required to meet
potential future standards. The EPA assessment of the proposal, as well
as Alternatives 1 and 2 predict the penetration into the fleet of a
large number of technologies at various rates of penetration. A subset
of these technologies are discussed below, while EPA's draft RIA
Chapter 3 includes the details on this much longer list for the
passenger car fleet, light-duty truck fleet, and the overall fleet at
both the industry and individual company level. Table III-33 and Table
III-34 present only a sub-set of the technologies EPA estimates could
be used to meet the proposed standards as well as alternative 1 and 2
in MY 2021. Table III-35 and Table III-36 show the same for 2025. The
technologies listed in these tables are those for which there is a
large difference in penetration rates between the proposal and the
alternatives. We have not included here, for example, the penetration
rates for improved high efficiency gear boxes because in 2021 our
modeling estimates a 58% penetration of this technology across the
total fleet for the proposal as well as for alternatives 1 and 2, or 8
speed automatic transmissions which in 2021 we estimate at a 28%
penetration
[[Page 75059]]
rate for the proposed standards as well as for alternatives 1 and 2.
There are several other technologies (shown in the Chapter 3 of the
DRIA) where there is little differentiation between the proposal and
alternatives 1 and 2.
Table III-33 shows that in 2021, for several technologies the
proposal requires higher levels of penetration for trucks than
alternative 1. For example, for trucks, compared to the proposal,
alternative 1 leads to an 8% decrease in the 24 bar turbo-charged/
downsized engines, a 10% decrease in the penetration of cooled EGR, and
a 12% decrease in the penetration of gasoline direct injection fuel
systems. We also see that due to credit transfer between cars and
trucks, the lower level of stringency considered for trucks in
alternative 1 also impacts the penetration of technology to the car
fleet--with alternative 1 leading to a 14% decrease in penetration of
18 bar turbo-downsized engines, 5% decrease in penetration of 24 bar
turbo-downsize engines, 8% decrease in penetration of 8 speed dual
clutch transmissions, and a 19% decrease in penetration of gasoline
direct injection fuel systems in the car fleet. For the more stringent
alternative 2, we see increases in the penetration of many of these
technologies projected for 2021, for the truck fleet as well as for the
car fleet. Table III-34 shows these same overall trends but at the
sales weighted fleet level in 2021.
[[Page 75060]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.098
Table III-35 shows that in 2025, there is only a small change in
many of these technology penetration rates when comparing the proposal
to alternative 1 for trucks, and most of the change shows up in the car
fleet. One important exception is hybrid electric vehicles, where the
less stringent alternative 1 is projected to be met with a 4% decrease
in penetration of HEVs compared to the proposal. As in 2021, we see
that due to credit transfer between cars and trucks, the lower level of
stringency considered for trucks in alternative 1 also impacts the car
fleet penetration--with alternative 1 leading to a 8% decrease in
penetration of 24 bar turbo-downsized engines, 12% decrease in
penetration of cooled EGR, 6% decrease in penetration of HEVs, and a 2%
decrease in penetration of electric vehicles. For the more stringent
alternative 2, we see only small increases in the penetration of many
of
[[Page 75061]]
these technologies projected for 2025, with a major exception being a
significant 14% increase in the penetration of HEVs for trucks compared
to the proposal, a 6% increase in the penetration of HEVs for cars
compared to the proposal, and a 3% increase in the penetration of EVs
for cars compared to the proposal.
[GRAPHIC] [TIFF OMITTED] TP01DE11.099
The results are similar for Alternatives 3 and 4, where the truck
standard stays at the proposal level and the car stringency varies, +20
g/mi and -20 g/mi respectively. Table III-37 presents our projected
per-vehicle cost for the average car, truck and for the fleet in model
year 2021 and 2025 for the proposal and for Alternatives 3 and
[[Page 75062]]
4. Compared to the proposal, Alternative 3 (with a 2021 and 2025 car
target 20 g/mile less stringent then the proposal) is $442 per vehicle
less on average than the proposal in 2021 and $708 per vehicle less
than the proposal in 2025. Alternative 4 (with a 2021 and 2025 car
target 20g/mile more stringent then the proposal) is $635 per vehicle
more on average than the proposal in 2021 and $923 per vehicle more
than the proposal in 2025. These differences are even more pronounced
than Alternatives 1 and 2. As in the analysis above, the costs
increases are greater for more stringent alternatives than the reduced
costs from the less stringent alternatives.
Note that although the car and truck costs are not too dissimilar
for cars and trucks for Alternative 3 in 2025, what is not shown is
that cars are over complying by 5 g/mi, while trucks are under
complying by 7 g/mi, thus indicating significant flow of credits from
cars to trucks. The situation is reversed in Alternative 4, where cars
are under complying by 6 g/mi and trucks are over complying by 12 g/mi
implying significant flow of credits from truck to cars.
[GRAPHIC] [TIFF OMITTED] TP01DE11.100
Table III-38 presents the per-vehicle cost estimates in MY 2021 by
company for the proposal, Alternative 3 and Alternative 4. In general,
for most of the companies our projected results show the same trends as
for the industry as a whole, with Alternative 3 being a several hundred
dollars per vehicle less expensive then the proposal, and Alternative 4
being several hundred dollars per vehicle more expensive (with larger
increment for more stringent than less stringent alternatives). In some
case the differences exceed $1,000 (e.g. BMW, Daimler, Geely/Volvo,
Mazda, Spyker/Saab, and Tata).
[[Page 75063]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.101
Table III-39 presents the per-vehicle cost estimates in MY 2025 by
company for the proposal, Alternative 3 and Alternative 4. In general,
for most of the companies our projected results show the same trends as
for the industry as a whole, with Alternative 3 on the order of $500 to
$1,400 per vehicle less expensive then the proposal, and Alternative 4
on the order of $700 to $1,600 per vehicle more expensive. Again these
differences are more pronounced for the car alternatives than the truck
alternatives.
[[Page 75064]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.102
Table III-40 shows that in 2021, for several technologies
Alternative 3 leads to lower levels of penetration for cars as well as
trucks compared to the proposal. For example (on cars) there is an 13%
decrease in the 18 bar turbo-charged/downsized engines, a 5% decrease
in the penetration of cooled EGR, and a 22% decrease in the penetration
of gasoline direct injection fuel systems. We also see that due to
credit transfer between cars and trucks, the lower level of stringency
considered for cars in alternative 3 also impacts the penetration of
technology to the truck fleet--with alternative 3 leading to 12%
decrease in penetration of 24 bar turbo-downsized engines, 13% decrease
in penetration of cooled EGR, and a 17% decrease in penetration of
gasoline direct injection fuel systems in the car fleet. For the more
stringent alternative 4, we see increases in the penetration of many of
these technologies projected for 2021, for the truck fleet as well as
for the car fleet. Table III-41 shows these same overall trends but at
the sales weighted fleet level in 2021.
[[Page 75065]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.103
Table III-42 shows that in 2025, there is only a small change in
many of these technology penetration rates when comparing the proposal
to alternative 3 for cars, and most of the change shows up in the car
fleet. There are a few
[[Page 75066]]
exceptions: There is a 15% decrease in the penetrate rate of 24 bar
bmep engines (made up somewhat by a 4% increase in 18 bar engines);
there is 20% less EGR boost and GDI, and 9% less hybrid electric
vehicles compared to the proposal. As in 2021, we see that due to
credit transfer between cars and trucks at the lower level of
stringency considered for cars in alternative 3 also impacts the truck
fleet penetration--with alternative 3 leading to 7% decrease in
penetration of HEVs. For the more stringent alternative 4, we see only
small increases in the penetration of many of these technologies
projected for 2025, with a major exception being a significant 9%
increase in the penetration of HEVs for cars compared to the proposal
(along with a drop in advanced engines), and a 20% increase in the
penetration of HEVs for trucks compared to the proposal.
[GRAPHIC] [TIFF OMITTED] TP01DE11.104
[[Page 75067]]
The trend for Alternatives 3 and 4 have thus far been that the
impacts have been more extreme than Alternatives 1 and 2 compared to
the proposal. Thus we will focus the discussion of feasibility on
Alternatives 1 and 2 (as the same will also then apply to 3 and 4
respectively).
As stated above, EPA's OMEGA analysis indicates that there is a
technology pathway for all manufacturers to build vehicles that would
meet the proposed standards as well as the alternative standards.\361\
The differences lie in the per-vehicle costs and the associated
technology penetrations. With the proposed standards, we estimate that
the average per-vehicle cost is $734 in 2021 and $1,946 in 2025. We
have also shown that the relative rate of increase in the stringencies
of cars and trucks are at an appropriate level such that there is
greater balance amongst the manufacturers where the distribution of the
burden is relatively evenly spread. In Section I.C of the Preamble, we
also showed that the benefits of the program are significant, and that
this cost can be recovered within the first four years of vehicle
ownership.
---------------------------------------------------------------------------
\361\ Except Ferrari.
---------------------------------------------------------------------------
EPA's analysis of the four alternatives indicates that under all of
the alternatives the projected response of the manufacturers is to
change both their car and truck fleets. Whether the car or truck
standard is being changed, and whether it is being made more or less
stringent, the response of the manufacturers is to make changes across
their fleet, in light of their ability to transfer credits between cars
and trucks. For example, Alternatives 1 and 3 make either the car or
trucks standard less stringent, and keep the other standard as is. For
both alternatives, manufacturers increase their projected
CO2 g/mile level achieved by their car fleet, and to a
lesser extent their truck fleet. For alternatives 2 and 4, where either
the truck or car fleet is made more stringent, and the other standard
is kept as is, manufacturers reduce the projected CO2 g/mile
level achieved by both their car and trucks fleets, in a generally
comparable fashion. This is summarized in Table III-44 for MY 2025.
[GRAPHIC] [TIFF OMITTED] TP01DE11.105
This demonstrates that the four alternatives are indicative of what
would happen if EPA increased the stringency of both the car and truck
fleet at the same time, or decreased the stringency of the car and
truck fleet at the same time. E.g., Alternative 4 would be comparable
to an alternative where EPA made the car standard more stringent by 14
gm/mi and the truck standard by 10 gm/mile. Under such an alternative,
there would logically be little if any net transfer of credits between
cars and trucks. In that context, the results from alternatives 1 and 3
can be considered as indicative of what would be expected if EPA
decreased the stringency of both the car and truck standards, and
alternatives 2 and 4 as indicative of what would happen if EPA
increased the stringency of both the car and truck standards. In
general, it appears that decreasing the stringency of the standards
would lead the manufacturers to focus more on increasing the
CO2 gm/mile of cars than trucks (alternatives 1 and 3).
Increasing the stringency of the car and truck standards would
generally lead to comparable increases in gm/mi for both cars and
trucks.
Alternatives 1 and 3 would achieve significantly lower reductions,
and would therefore forego important benefits that the proposed
standards would achieve at reasonable costs and
[[Page 75068]]
penetrations of technology. EPA judges that there is not a good reason
to forego such benefits, and is not proposing less stringent standards
such as alternatives 1 and 3.
Alternatives 2 and 4 increase the per vehicle estimates to $1,077
and $1,369 respectively in 2021 and $2,462 and $2,869 respectively in
2025. This increase in cost from the proposal originates from the
dramatic increases in the costlier electrification technologies, such
as HEVs and EVs. The following tables and charts show the technology
penetrations by manufacturer in greater detail.
Table III-45 and later tables describe the projected penetration
rates for the OEMs of some key technologies in MY 2021 and MY2025 under
the proposed standards. TDS27, HEV, and PHEV+EV technologies represent
the most costly technologies added in the package generation process,
and the OMEGA model generally adds them as one of the last technology
choices for compliance. They are therefore an indicator of the extent
to which the stringency of the standard is pushing the manufacturers to
the most costly technology. Cost (as shown above) is a similar
indicator.
Table III-45 describes technology penetration for MY2021 under the
proposal.
[[Page 75069]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.106
It can be seen from this table that the larger volume manufacturers
have levels of advanced technologies that are below the phase in caps
(described in the next table). On the other hand, smaller ``luxury''
volume manufacturers tend to
[[Page 75070]]
require higher levels of these technologies. BMW, Daimler, Volvo,
Porsche, Saab, Jaguar/LandRover, and VW all reach the maximum
penetration cap for HEVs (30%) in 2021. Suzuki is the only other
company with greater than 20% penetration of HEVs and only two
manufacturers have greater than 10% penetration of PH/EVs: Porsche and
Saab. Together these seven ``luxury'' vehicle manufacturers represent
12% of vehicle sales and their estimated cost of compliance with 2021
proposed standards is $2,178 compared to $744 for the others.
It is important to review some of the caps or limits on the
technology phase in rates described in Chapter 3.5.2.3 of the joint TSD
as it relates to the remainder of this discussion. These are upper
limits on the penetration rates allowed under our modeling, and reflect
an estimate of the physical limits for such penetration. It is not a
judgment that rates below that cap are practical or reasonable, and is
intended to be more of a physical limit of technical capability in
light of conditions such as supplier capacity, up-front investment
capital requirements, manufacturability, and other factors. For
example, in MY 2010, there are presently 3% HEVs in the new vehicle
fleet. In MYs 2015, 2021 and 2025 we project that this cap on
technology penetration rate increases to 15%, 30% and 50% respectively.
For PH/EVs in MY 2010, there is practically none of these technologies.
In MYs 2015, 2021 and 2025 we project that this cap on technology
penetration rate increases to approximately 5%, 10% and 15%
respectively for EVs and PHEVs separately. These highly complex
technologies also have the slowest penetration phase-in rates to
reflect the relatively long lead time required to implement into
substantial fractions of the fleet subject to the manufacturers'
product redesign schedules. In contrast, an advanced technology still
under development based on an improved engine design, TDS27, has a cap
on penetration phase in rate in MYs 2015, 2021, and 2025 of 0%, 15%,
and 50% indicative of a longer lead time to develop the technology, but
a relatively faster phase in rate once the technology is ``ready''
(consistent with other ``conventional'' evolutionary improvements).
Table III-46 summarizes the caps on the phase in rates of some of the
key technologies. A penetration rate result from the analysis that
approaches the caps for these technologies for a given manufacturer is
an indication of how much that manufacturer is being ``pushed'' to
technical limits by the standards. This will be in direct correlation
to the cost of compliance for that same manufacturer.
[GRAPHIC] [TIFF OMITTED] TP01DE11.108
Table III-47 shows the technology penetrations for Alternative 2.
Immediately striking is the penetration rates of truck HEVs in the
fleet: Even in 2021, it nearly doubles in comparison to the proposal.
The Ford truck fleet (to take one of the largest volume manufacturers
as an example) increases from 2% HEVs in the proposal trucks to 16% in
Alternative 2, an eightfold increase.
There are other significant increases in the larger manufacturers
and even more dramatic increases in the HEV penetration in smaller
manufacturers' fleets. For example, Suzuki cars now reach the maximum
technology penetration cap of 30% for HEVs and Mitsubishi now has 20%
HEVs. Also, there are now four manufacturers with total fleet PH/EV
penetration rates equal to 10% or greater.
The larger volume manufacturers have an estimated per vehicle cost
of compliance with 2021 alternative standards of $1,044, which is $555
higher than the proposed standards. The seven ``luxury'' vehicle
manufacturers now have estimated costs of $2,733, which is $300 higher
than the proposed standards (See Table III-12 above).
[[Page 75071]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.109
BILLING CODE 4910-59-P
Table III-48 shows the technology penetrations for Alternative 4
for MY 2021. The large volume manufacturer, Ford now has a 25%
penetration rate of
[[Page 75072]]
truck HEVs (a 23% increase compared to the proposed standards) and the
fleet penetration has gone up 11 fold for this company in comparison to
the proposed standards.
Mitsubishi, and Suzuki cars now reach the maximum technology
penetration cap of 30% for HEVs, and Mazda, Subaru cars as well as Ford
trucks now have greater than 20% HEVs. Also, there are now six
manufacturers with PH/EV penetration rates greater than 10%.
The larger volume manufacturers now have an estimated per vehicle
cost of compliance with 2021 alternative standards of $1,428, which is
$683 higher than the proposed standards. The seven ``luxury'' vehicle
manufacturers now have estimated costs of $3,499, which is $1,320
higher than the proposed standard (See Table III-32 above). For the
seven luxury manufacturers, this per vehicle cost exceeds the costs
under the proposal for complying with the considerably more stringent
2025 standards.
[[Page 75073]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.110
Table III-49 shows the technology penetrations for the proposed
standards in 2025. The larger volume manufacturers have levels of
advanced technologies that are below the phase in caps (described in
the next table),
[[Page 75074]]
though there are some notably high penetration rates for truck HEVs for
Ford and Nissan.\362\ For the fleet in general, we note a 3%
penetration rate of PHEV+EVs--it is interesting to note that this is
the penetration rate of HEVs today. EPA believes that there is
sufficient lead time to have this level of penetration of these
vehicles by 2025. Case in point, it has taken approximately 10 years
for HEV penetration to get to the levels that we see today, and that
was without an increase in the stringency of passenger car CAFE
standards.
---------------------------------------------------------------------------
\362\ EPA has not conducted an analysis of pickup truck HEV
penetration rates compared to the remainder of the truck fleet. This
may be conducted for the final rule.
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[[Page 75075]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.111
Six of the seven luxury vehicle manufacturers reach the maximum
penetration cap on their truck portion of their fleet; however, no
company reaches 50% for their combined fleet. The seven do have over
30%
[[Page 75076]]
penetration rate of HEVs, while Suzuki is the only company to have
between 20 and 30% HEVs. Six of the 7 luxury vehicle manufacturers also
have greater than 10% penetration of PH/EVs (which has a total cap of
29%). The only company to have large penetration rates (>15%) of TDS27
is Jaguar/LandRover at 29%.
The estimated per vehicle cost of compliance with 2025 proposed
standards is $1,943 for the larger volume manufacturers and $3,133 for
the seven ``luxury'' vehicle manufacturers.
Table III-50 shows the technology penetrations for Alternative 2 in
2025. In this alternative Chrysler trucks nearly double their
penetration rate of HEVs along with dramatic increases in car and truck
PH/EVs. GM has a very large increase in truck HEVs as well: From 3% in
the proposed to 39% in the alternative standards along with a doubling
of PH/EVs. Toyota also has double the number of HEVs. In this
alternative there are many more companies with 20-30% HEVs: Chrysler,
Ford, GM, Mitsubishi, Nissan, Subaru, Suzuki, and Toyota. Suzuki (in
addition to the seven) now also has 10% or greater penetration of PH/
EVs. Ford, GM, Chrysler, and Nissan now have more than 20% penetration
of HEVs in trucks.
The estimated per vehicle cost of compliance with 2025 alternative
2 standards is $2,354, which is $410 higher than the proposed
standards. The seven luxury vehicle manufacturers now have costs of
$3,616, which is $483 higher than the proposed standards. See Table
III-32 above.
[[Page 75077]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.112
Table III-51 shows the technology penetrations for Alternative 4 in
2025. In this alternative every company except Honda, Hyundai, Kia have
greater than 20% HEVs. Many of the large volume manufacturers have even
more dramatic
[[Page 75078]]
increases in the volumes of P/H/EVs than in Alternative 2. Ford, GM,
Nissan, and Toyota have greater than 20 or 30% penetration rates of
HEVs on trucks. Mazda, Mitsubishi, Subaru, Suzuki (in addition to the
seven) now also have 10% or greater penetration of PH/EVs, while
Daimler, Volvo, Porsche, Saab, and VW have over 20%.
The estimated per vehicle cost of compliance with 2025 alternative
standards is $2,853, which is $910 higher than the proposed standards.
The seven luxury vehicle manufacturers now have costs of $4,481, which
is $1,348 higher than the proposed standards. Much of this non-linear
increase in cost is due to increased penetration of PHEVs and EVs (more
so than HEVs).
[[Page 75079]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.113
[[Page 75080]]
d. Summary of the Technology Penetration Rates and Costs From the
Alternative Scenarios in Relation to the Proposed Standards
As described above, alternatives 2 and 4 would lead to significant
increases in the penetration of advanced technologies into the fleet
during the time frame of these standards. In general, both alternatives
would lead to an increase in the average penetration rate for advanced
technologies in 2021, in effect accelerating some of the technology
penetration that would otherwise occur in the 2022-2025 timeframe. For
the fleet as a whole, in 2021 alternative 2 would lead to a significant
increase in cooled EGR use and a limited increase in HEV use, while
alternative 4 would lead to an even larger increase in cooled EGR as
well as a significant increase in HEV use. In 2025 these alternatives
would dramatically affect penetration rates of HEVs, EVs, and PHEVs, in
each case leading to very significant increases on average for the
fleet. Again, Alternative 4 would lead to greater penetration rates
than Alternative 2. When one considers the technology penetration rates
for individual manufacturers, in 2021 the alternatives lead to much
higher increases than average for some individual large volume
manufacturers. Smaller volume manufacturers start out with higher
penetration rates and are pushed to even higher levels. This result is
even more pronounced in 2025.
This increase in technology penetration rates raises serious
concerns about the ability and likelihood manufacturers can smoothly
implement the increased technology penetration in a fleet that has so
far seen limited usage of these technologies, especially for trucks--
and for towing trucks in particular. While this is more pronounced for
2025, there are still concerns for the 2021 technology penetration
rates. Although EPA believes that these penetration rates are, in the
narrow sense, technically achievable, it is more a question of judgment
whether we are confident at this time that these increased rates of
advanced technology usage can be practically and smoothly implemented
into the fleet--a reason the agencies are attempting to encourage more
utilization of this technology with the proposed HEV pickup truck
credits but being reasonably prudent in proposing standards that could
de facto force high degrees of penetration of this technology on towing
trucks.\363\
---------------------------------------------------------------------------
\363\ See 76 FR at 57220 discussing a similar issue in the
context of the standards for heavy duty pickups and vans: ``Hybrid
electric technology likewise could be applied to heavy-duty
vehicles, and in fact has already been so applied on a limited
basis. However, the development, design, and tooling effort needed
to apply this technology to a vehicle model is quite large, and
seems less likely to prove cost-effective in this time frame, due to
the small sales volumes relative to the light-duty sector. Here
again, potential customer acceptance would need to be better
understood because the smaller engines that facilitate much of a
hybrid's benefit are typically at odds with the importance pickup
truck buyers place on engine horsepower and torque, whatever the
vehicle's real performance''.
---------------------------------------------------------------------------
EPA notes that the same concerns support the proposed decision to
steepen the slope of the truck curve in acknowledgement of the special
challenges these larger footprint trucks (which in many instances are
towing vehicles) would face. Without the steepening, the penetration
rates of these challenging technologies would have been even greater.
From a cost point of view, the impacts on cost track fairly closely
with the technology penetration rates discussed above. The average cost
increases under Alternatives 2 and 4 are significant for 2021
(approximately $300 and $600), and for some manufacturers they result
in very large cost increases. For 2025 the cost increases are even
higher (approximately $500 and $900). Alternative 4, as expected, is
significantly more costly than alternative 2. From another perspective,
the average cost of compliance to the industry on average is $23 and
$44 billion for the 2021 and 2025 proposed standards respectively.
Alternative 2 will cost the industry on average $7 and $9 billion in
excess, while Alternative 4 will cost the industry on average $10 and
$16 billion in excess of the costs for the proposed standards. These
are large increases in percentage terms, ranging from approximately 25%
to 45% in 2021, and from approximately 20% to 35% in 2025.
Per vehicle costs will also increase dramatically including for
some of the largest, full-line manufacturers. Under Alternative 2, per
vehicle costs for Chrysler, Ford, GM, Honda and Nissan increase by an
estimated one-third to nearly double (200%) to meet 2021 standards and
from roughly 25% to 45% to meet 2025 standards (see Table III-31 and
Table III-32 above). The per-vehicle costs to meet Alternative 4 for
these manufacturers is significantly greater and in the same
proportions, see Table III-38 and Table III-39.
As noted, these cost increases are associated especially with
increased utilization of advanced technologies. As shown in Figure
below, HEV+PHEV+EV penetration are projected to increase in 2025 from
17% in the proposed standards to 28% and to nearly 35% under
Alternatives 2 and 4 respectively for manufacturers with annual sales
above 500,000 vehicles (including Chrysler, Ford, GM, Honda, Hyundai,
Nissan, Toyota and VW). The differences are less pronounced for 2021,
but still (in alternative 4) over double the penetration level of the
proposal. EPA regards these differences as significant, given the
factors of expense, consumer cost, consumer acceptance, and potentially
(for 2021) lead time.
BILLING CODE 491-59-P
[[Page 75081]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.114
The Figure below shows the HEV+PHEV+EV penetration for
manufacturers with sales below 500,000 but exceeding 30,000 (including
BMW, Daimler, Volvo, Kia, Mazda, Mitsubishi, Porsche, Subaru, Suzuki,
and Jaguar/LandRover while excluding Aston Martin, Ferrari, Lotus,
Saab, and Tesla). While the penetration rates of these advanced
technologies also increase, the distribution within these are shifting
to the higher cost EVs and PHEVs as noted above.
[[Page 75082]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.115
EPA did not model a number of flexibilities when conducting the
analysis for the NPRM. For example, PHEV, EV and fuel cell vehicle
incentive multipliers for 2017-2021, full size pickup truck HEV
incentive credits, full size pickup truck performance based incentive
credits, and off-cycle credits, were not explicitly captured. We plan
on modeling these flexibilities for the final rule. For this proposal,
while we have not been able to explicitly model the impacts on the
program costs, the impact will only be to reduce the estimated costs of
the program for most manufacturers. From an industry wide perspective,
EPA expects that their overall impact on costs, technology penetration,
and emissions reductions and other benefits will be limited. They will
provide some additional, important flexibility in achieving the
proposed levels and promoting more advanced technology, on a case by
case basis, but their impact is not expected to be of enough
significance to warrant a change to the standards proposed. Instead
they are expected to support the reasonableness of the proposed
standards.
Overall, EPA believes that the characteristics and impacts of these
and other alternative standards generally reflect a continuum in terms
of technical feasibility, cost, lead time, consumer impacts, emissions
reductions and oil savings, and other factors evaluated under section
202 (a). In determining the appropriate standard to propose in this
context, EPA judges that the proposed standards are appropriate and
preferable to more stringent alternatives based largely on
consideration of cost--both to manufacturers and to consumers--and the
potential for overly aggressive penetration rates for advanced
technologies relative to the penetration rates seen in the proposed
standards, especially in the face of unknown degree of consumer
acceptance of both the increased costs and the technologies themselves.
At the same time, the proposal helps to address these issues by
providing incentives to promote early and broader deployment of
advanced technologies, and so provides a means of encouraging their
further penetration while leaving manufacturers alternative technology
choices. EPA thus judges that the increase in technology penetration
rates and the increase in costs under the increased stringency for the
car and truck fleets reflected in alternatives 2 and 4 are such that it
would not be appropriate to propose standards that would increase the
stringency of the car and truck fleets in this manner.
The two tables below shows the year on year costs as described in
greater detail in Chapter 5 of the RIA. These projections show a steady
increase in costs from 2017 thru 2025 (as interpolated).
[[Page 75083]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.116
[[Page 75084]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.117
Figure 7 below shows graphically the year on year average costs
presented in Table III-53 with the per vehicle costs on the left axis
and the projected CO2 target standards on the right axis. It
is quite evident and intuitive that as the stringency of the standard
gets tighter, the average per vehicle costs increase. It is also clear
that the costs for cars exceed that of trucks for the early years of
the program, but then progress upwards together starting in MY 2021. It
is interesting to note that the slower rate of progression of the
standards for trucks seems to result in a slower rate of increase in
costs for both cars and trucks. This initial slower rate of stringency
for trucks is appropriate due primarily concerns over technology
penetration rates and disproportionately higher costs for adding
technologies to trucks than cars, as described in Section III.D.6.b
above. The figure below corroborates these conclusions and further
demonstrates that based on the smooth progression of average costs
(from 2017-2025), the year on year increase in stringency of the
standards is also reasonable. Though there are undoubtedly a range of
minor modifications that could be made to the progression of standards,
EPA believes that the progression proposed is reasonable and
appropriate. Also, EPA believes that any progression of standards that
significantly deviates from the proposed standards (such as those in
Alternatives 1 through 4) are much less appropriate for the reasons
provided in the discussion above.
[GRAPHIC] [TIFF OMITTED] TP01DE11.999
[[Page 75085]]
7. To what extent do any of today's vehicles meet or surpass the
proposed MY 2017-2025 CO2 footprint-based targets with
current powertrain designs?
In addition to the analysis discussed above regarding what
technologies could be added to vehicles in order to achieve the
projected CO2 obligation for each automotive company under
the proposed MY 2017 to 2025 standards, EPA performed an assessment of
the light-duty vehicles available in the market today to see how such
vehicles compare to the proposed MY 2017-2025 footprint-based standard
curves. This analysis supports EPA's overall assessment that there are
a broad range of effective and available technologies that could be
used to achieve the proposed standards, as well as illustrating the
need for the lead-time between today and MY 2017 to MY 2025 in order
for continued refinement of today's technologies and their broader
penetration across the fleet for the industry as a whole as well as
individual companies. In addition, this assessment supports EPA's view
that the proposed standards would not interfere with consumer utility--
footprint-attribute standards provide manufacturers with the ability to
offer consumers a full range of vehicles with the utility customers
want, and does not require or encourage companies to just produce small
passenger cars with very low CO2 emissions.
Using publicly available data, EPA compiled a list of available
vehicles and their 2-cycle CO2 emissions performance (that
is, the performance over the city and highway test cycles required by
this proposal). Data is currently available for all MY 2011 vehicles
and some MY 2012 vehicles. EPA gathered vehicle footprint data from EPA
reports, manufacturer submitted CAFE reports, and manufacturer Web
sites.
EPA evaluated these vehicles against the proposed CO2
footprint-based standard curves to determine which vehicles would meet
or exceed the proposed MY 2017-MY 2025 footprint-based CO2
targets assuming air conditioning credit generation consistent with
today's proposal. Under the proposed 2017-2025 greenhouse gas emissions
standards, each vehicle will have a unique CO2 target based
on the vehicle's footprint. However, it is important to note that the
proposed CO2 standard is a company-specific sales weighted
fleet-wide standard for each company's passenger cars and truck fleets
calculated using the proposed footprint-based standard curves. No
individual vehicle is required to achieve a specific CO2
target. In this analysis, EPA assumed usage of air conditioner credits
because air conditioner improvements are considered to be among the
cheapest and easiest technologies to reduce greenhouse gas emissions,
manufacturers are already investing in air conditioner improvements,
and air conditioner changes do not impact engine, transmission, or
aerodynamic designs so assuming such credits does not affect
consideration of cost and leadtime for use of these other technologies.
In this analysis, EPA assumed increasing air conditioner credits over
time with a phase-in of alternative refrigerant for the generation of
HFC leakage reduction credits consistent with the assumed phase-in
schedule discussed in Section III.C.I. of this preamble. No adjustments
were made to vehicle CO2 performance other then this
assumption of air conditioning credit generation. Under this analysis,
a wide range of existing vehicles would meet the MY 2017 proposed
CO2 targets, and a few meet even the proposed MY 2025
CO2 targets. The details regarding this assessment are in
Chapter 3 of the EPA Draft RIA.
This assessment shows that a significant number of vehicles models
sold today (nearly 40 models) would meet or be lower than the proposed
MY 2017 footprint-based CO2 targets with current powertrain
designs, assuming air conditioning credit generation consistent with
our proposal. The list of vehicles includes a full suite of vehicle
sizes and classes, including midsize cars, minivans, sport utility
vehicles, compact cars, small pickup trucks and full size pickup
trucks--all of which meet the proposed MY 2017 target values with no
technology improvements other than air conditioning system upgrades.
These vehicles utilize a wide variety of powertrain technologies and
operate on a variety of different fuels including gasoline, diesel,
electricity, and compressed natural gas. Nearly every major
manufacturer currently produces vehicles that would meet or exceed the
proposed MY 2017 footprint CO2 target with only improvements
in air conditioning systems. For all of these vehicle classes the MY
2017 targets are achieved with conventional gasoline powertrains, with
the exception of the full size (or ``standard'') pickup trucks. In the
case of full size pickups trucks, only HEV versions of the Chevrolet
Silverado and the GMC Sierra fall into this category (though the HEV
Silverado and Sierra meet not just the MY 2017 footprint-based
CO2 targets with A/C improvements, but their respective
targets through MY 2022). As the CO2 targets become more
stringent each model year, fewer MY 2011 and MY 2012 vehicles achieve
or surpass the proposed CO2 targets, in particular for
gasoline powertrains. While approximately 15 unique gasoline vehicle
models achieve or surpass the MY 2017 targets, this number falls to
approximately 11 for the MY 2018 targets, 9 for the model year 2019
targets, and only 2 unique gasoline vehicle models can achieve the MY
2020 proposed CO2 targets with A/C improvements.
EPA also assessed the subset of these vehicles that have emissions
within 5%, of the proposed CO2 targets. As detailed in
Chapter 3 of the EPA Draft RIA, the analysis shows that there are more
than twenty additional vehicle models (primarily with gasoline and
diesel powertrains) that are within 5% of the proposed MY 2017
CO2 targets, including compact cars, midsize cars, large
cars, SUVs, station wagons, minivans, small and standard pickup trucks.
EPA also receives projected sales data prior to each model year from
each manufacturer. Based on this data, approximately 7% of MY 2011
sales will be vehicles that would meet or be better than the proposed
MY 2017 targets for those vehicles, requiring only improvements in air
conditioning systems. In addition, nearly 15% of projected MY 2011
sales would be within 5% of the proposed MY 2017 footprint
CO2 target with only simple improvements to air conditioning
systems, a full six model years before the proposed standard takes
effect. With improvements to air conditioning systems, the most
efficient gasoline internal combustion engines would meet the MY 2020
proposed footprint targets. After MY 2020, the only current vehicles
that continue to meet the proposed footprint-based CO2
targets (assuming improvements in air conditioning) are hybrid-
electric, plug-in hybrid-electric, and fully electric vehicles.
However, the proposed MY 2021 standards, if finalized, would not need
to be met for another 9 years. Today's Toyota Prius, Ford Fusion
Hybrid, Chevrolet Volt, Nissan Leaf, Honda Civic Hybrid, and Hyundai
Sonata Hybrid all meet or surpass the proposed footprint-based
CO2 targets through MY 2025. In fact, the current Prius,
Volt, and Leaf meet the proposed 2025 CO2 targets without
air conditioning credits.
This assessment of MY 2011 and MY 2012 vehicles makes it clear that
HEV technology (and of course EVs and PHEVs) is capable of achieving
the MY 2025 standards. However, as discussed
[[Page 75086]]
earlier in this section, EPA's modeling projects that the MY 2017-2025
standards can primarily be achieved by advanced gasoline vehicles--for
example, in MY 2025, we project more than 80 percent of the new
vehicles could be advanced gasoline powertrains. The assessment of MY
2011 and MY 2012 vehicles available in the market today indicates
advanced gasoline vehicles (as well as diesels) can achieve the targets
for the early model years of the proposed standards (i.e., model years
2017-2020) with only improvements in air conditioning systems. However,
significant improvements in technologies are needed and penetrations of
those technologies must increase substantially in order for individual
manufacturers (and the fleet overall) to achieve the proposed standards
for the early years of the program, and certainly for the later years
(i.e., model years 2021-2025). These technology improvements are the
very technologies EPA and NHTSA describe in detail in Chapter 3 of the
draft Joint Technical Support Document and which we forecasted
penetration rates earlier in this section III.D, and they include for
example: gasoline direct injection fuel systems; downsized and
turbocharged gasoline engines (including in some cases with the
application of cooled exhaust gas recirculation); continued
improvements in engine friction reduction and low friction lubricants;
transmissions with an increased number of forward gears (e.g., 8
speeds); improvements in transmission shifting logic; improvements in
transmission gear box efficiency; vehicle mass reduction; lower rolling
resistance tires, and improved vehicle aerodynamics. In many (though
not all) cases these technologies are beginning to penetrate the U.S.
light-duty vehicle market.
In general, these technologies must go through the automotive
product development cycle in order to be introduced into a vehicle. In
some cases additional research is needed before the technologies'
CO2 benefits can be fully realized and large-scale
manufacturing can be achieved. The subject of technology penetration
phase-in rates is discussed in more detail in Chapter 3.5 of the draft
Joint Technical Support Document. In that Chapter, we explain that why
many CO2 reducing technologies should be able to penetrate
the new vehicle market at high levels between now and MY 2016. There
are also many of the key technologies we project as being needed to
achieve the proposed 2017-2025 standards which will only be able to
penetrate the market at relatively low levels (e.g., a maximum level of
30% or less) by MY 2016, and even by MY 2021. These include important
powertrain technologies such as 8-speed transmissions and second or
third generation downsized engines with turbocharging,
The majority of these technologies must be integrated into vehicles
during the product redesign schedule, which is typically on a 5-year
cycle. EPA discussed in the MY 2012-2016 rule the significant costs and
potential risks associated with requiring major technologies to be
added in-between the typical 5-year vehicle redesign schedule (see 75
FR at 25467-68, May 7, 2010). In addition, engines and transmissions
generally have longer lifetimes then 5 years, typically on the order of
10 years. Thus major powertrain technologies generally take longer to
penetrate the new vehicle fleet then can be done in a 5-year redesign
cycle. As detailed in Chapter 3.5 of the draft Joint TSD, EPA projects
that 8-speed transmissions could increase their maximum penetration in
the fleet from 30% in MY 2016 to 80% in 2021 and to 100% in MY 2025.
Similarly, we project that second generation downsized and turbocharged
engines (represented in our assessment as engines with a brake-mean
effective pressure of 24 bars) could penetrate the new vehicle fleet at
a maximum level of 15% in MY 2016, 30% in MY 2021, and 75% in MY 2025.
When coupled with the typical 5-year vehicle redesign schedule, EPA
projects that it is not possible for all of the advanced gasoline
vehicle technologies we have assessed to penetrate the fleet in a
single 5-year vehicle redesign schedule.
Given the status of the technologies we project to be used to
achieve the proposed MY2017-2025 standards and the product development
and introduction process which is fairly standard in the automotive
industry today, our assessment of the MY2011 and MY2012 vehicles in
comparison to the proposed standards supports our overall feasibility
assessment, and reinforces our assessment of the lead time needed for
the industry to achieve the proposed standards.
E. Certification, Compliance, and Enforcement
1. Compliance Program Overview
This section summarizes EPA's comprehensive program to ensure
compliance with emission standards for carbon dioxide (CO2),
nitrous oxide (N2O), and methane (CH4), as
described in Section III.B. An effective compliance program is
essential to achieving the environmental and public health benefits
promised by these mobile source GHG standards. EPA's GHG compliance
program is designed around two overarching priorities: (1) to address
Clean Air Act (CAA) requirements and policy objectives; and (2) to
streamline the compliance process for both manufacturers and EPA by
building on existing practice wherever possible, and by structuring the
program such that manufacturers can use a single data set to satisfy
both GHG and Corporate Average Fuel Economy (CAFE) testing and
reporting requirements. The EPA and NHTSA programs replicate the
compliance protocols established in the MY 2012-2016 rule.\364\ The
certification, testing, reporting, and associated compliance activities
track current practices and are thus familiar to manufacturers. As is
the case under the 2012-2016 program, EPA and NHTSA have designed a
coordinated compliance approach for 2017-2025 such that the compliance
mechanisms for both GHG and CAFE standards are consistent and non-
duplicative. Readers are encouraged to review the MY 2012-2016 final
rule for background and a detailed description of these certification,
compliance, and enforcement requirements.
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\364\ 75 FR 25468.
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Vehicle emission standards established under the CAA apply
throughout a vehicle's full useful life. Today's rule establishes fleet
average greenhouse gas standards where compliance with the fleet
average is determined based on the testing performed at time of
production, as with the current CAFE fleet average. EPA is also
establishing in-use standards that apply throughout a vehicle's useful
life, with the in-use standard determined by adding an adjustment
factor to the emission results used to calculate the fleet average.
EPA's program will thus not only assess compliance with the fleet
average standards described in Section III.B, but will also assess
compliance with the in-use standards. As it does now, EPA will use a
variety of compliance mechanisms to conduct these assessments,
including pre-production certification and post-production, in-use
monitoring once vehicles enter customer service. Under this compliance
program manufacturers will also be afforded numerous flexibilities to
help achieve compliance, both stemming from the program design itself
in the form of a manufacturer-specific CO2 fleet average
standard, as well as in various credit banking and trading
opportunities, as described in
[[Page 75087]]
Section III.C. The compliance program is summarized in further detail
below.
2. Compliance With Fleet-Average CO2 Standards
Fleet average emission levels can only be determined when a
complete fleet profile becomes available at the close of the model
year. Therefore, EPA will determine compliance with the fleet average
CO2 standards when the model year closes out, based on
actual production figures for each model and on model-level emissions
data collected through testing over the course of the model year.
Manufacturers will submit this information to EPA in an end-of-year
report which is discussed in detail in Section III.E.5.h of the MY
2012-2016 final rule preamble (see 75 FR 25481).
a. Compliance Determinations
As described in Section III.B above, the fleet average standards
will be determined on a manufacturer by manufacturer basis, separately
for cars and trucks, using the footprint attribute curves. EPA will
calculate the fleet average emission level using actual production
figures and, for each model type, CO2 emission test values
generated at the time of a manufacturer's CAFE testing. EPA will then
compare the actual fleet average to the manufacturer's footprint
standard to determine compliance, taking into consideration use of
averaging and credits.
Final determination of compliance with fleet average CO2
standards may not occur until several years after the close of the
model year due to the flexibilities of carry-forward and carry-back
credits and the remediation of deficits (see Section III.B). A failure
to meet the fleet average standard after credit opportunities have been
exhausted could ultimately result in penalties and injunctive orders
under the CAA as described in Section III.E.6 below.
b. Required Minimum Testing For Fleet Average CO2
EPA will require and use the same test data to determine a
manufacturer's compliance with both the CAFE standard and the fleet
average CO2 emissions standard. Please see Section III.E.2.b
of the MY 2012-2016 final rule preamble (75 FR 25469) for details.
3. Vehicle Certification
CAA section 203(a)(1) prohibits manufacturers from introducing a
new motor vehicle into commerce unless the vehicle is covered by an
EPA-issued certificate of conformity. Section 206(a)(1) of the CAA
describes the requirements for EPA issuance of a certificate of
conformity, based on a demonstration of compliance with the emission
standards established by EPA under section 202 of the Act. The
certification demonstration requires emission testing, and must be done
for each model year.\365\
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\365\ CAA section 206(a)(1).
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Since compliance with a fleet average standard depends on actual
production volumes, it is not possible to determine compliance with the
fleet average at the time the manufacturer applies for and receives a
certificate of conformity for a test group. Instead, EPA will continue
to condition each certificate of conformity for the GHG program upon a
manufacturer's demonstration of compliance with the manufacturer's
fleet-wide average CO2 standard. Please see Section III.E.3
of the MY 2012-2016 final rule preamble (75 FR 25470) for a discussion
of how EPA will certify vehicles under the GHG standards.
4. Useful Life Compliance
Section 202(a)(1) of the CAA requires emission standards to apply
to vehicles throughout their statutory useful life, as further
described in Section III.A. The in-use CO2 standard under
the greenhouse gas program would apply to individual vehicles and is
separate from the fleet-average standard. The in-use CO2
standard for each model would be the model specific CO2
level used in calculating the fleet average, adjusted to be 10% higher
to account for test-to-test and production variability that might
affect in-use test results. Please see Section III.E.4 of the MY 2012-
2016 final rule preamble (75 FR 25473 for a detailed discussion of the
in-use standard, in-use testing requirements, and deterioration factors
for CO2, N2O, and CH4.
5. Credit Program Implementation
As described in Section III.C, several credit programs are
available under this rulemaking. Please see Section III.E.5 of the MY
2012-2016 final rule preamble (75 FR 25477) for a detailed explanation
of credit program implementation, sample credit and deficit
calculations, and end-of-year reporting requirements.
6. Enforcement
The enforcement structure EPA promulgated under the MY 2012-2016
rulemaking remains in place. Please see Section III.E.6 of the MY 2012-
2016 final rule preamble (75 FR 25482) for a discussion of these
provisions.
Prohibited Acts in the CAA
Section 203 of the Clean Air Act describes acts that are prohibited
by law. This section and associated regulations apply equally to the
greenhouse gas standards as to any other regulated emission. Acts that
are prohibited by section 203 of the Clean Air Act include the
introduction into commerce or the sale of a vehicle without a
certificate of conformity, removing or otherwise defeating emission
control equipment, the sale or installation of devices designed to
defeat emission controls, and other actions. This proposal includes a
section that details these prohibited acts, as did the 2012 greenhouse
gas regulations.
7. Other Certification Issues
a. Carryover/Carry Across Certification Test Data
EPA's certification program for vehicles allows manufacturers to
carry certification test data over and across certification testing
from one model year to the next, when no significant changes to models
are made. EPA would continue to apply this policy to CO2,
N2O and CH4 certification test data and would
allow manufacturers to use carryover and carry across data to
demonstrate CO2 fleet average compliance if they have done
so for CAFE purposes.
b. Compliance Fees
The CAA allows EPA to collect fees to cover the costs of issuing
certificates of conformity for the classes of vehicles covered by this
rule.
At this time the extent of any added costs to EPA as a result of
this rule is not known. EPA will assess its compliance testing and
other activities associated with the rule and may amend its fees
regulations in the future to include any warranted new costs.
c. Small Entity Exemption
EPA would exempt small entities, and these entities (necessarily)
would not be subject to the certification requirements of this rule.
As discussed in Section III.B.7, businesses meeting the Small
Business Administration (SBA) criterion of a small business as
described in 13 CFR 121.201 would not be subject to the GHG
requirements, pending future regulatory action. Small entities are
currently covered by a number of EPA motor vehicle emission
regulations, and they routinely submit information and data on an
annual basis as part of their compliance responsibilities.
[[Page 75088]]
As discussed in detail in Section III.B.5, small volume
manufacturers with annual sales volumes of less than 5,000 vehicles
would be required to meet primary GHG standards or to petition the
Agency for alternative standards.
d. Onboard Diagnostics (OBD) and CO2 Regulations
As under the current program, EPA would not require CO2,
N2O, and CH4 emissions as one of the applicable
standards required for the OBD monitoring threshold.
e. Applicability of Current High Altitude Provisions to Greenhouse
Gases
As under the current program, vehicles covered by this rule would
be required to meet the CO2, N2O and
CH4 standard at altitude but would not normally be required
to submit vehicle CO2 test data for high altitude. Instead,
they would submit an engineering evaluation indicating that common
calibration approaches will be utilized at high altitude.
f. Applicability of Standards to Aftermarket Conversions
With the exception of the small entity and small business
exemptions, EPA's emission standards, including greenhouse gas
standards, will continue to apply as stated in the applicability
sections of the relevant regulations. EPA expects that some aftermarket
conversion companies will qualify for and seek the small entity and/or
small business exemption, but those that do not qualify will be
required to meet the applicable emission standards, including the
greenhouse gas standards to qualify for a tampering exemption under 40
CFR subpart F. Fleet average standards are not generally appropriate
for fuel conversion manufacturers because the ``fleet'' of vehicles to
which a conversion system may be applied has already been accounted for
under the OEM's fleet average standard. Therefore, EPA is proposing to
retain the process promulgated in 40 CFR subpart F anti-tampering
regulations whereby conversion manufacturers demonstrate compliance at
the vehicle rather than the fleet level. Fuel converters will continue
to show compliance with greenhouse gas standards by submitting data to
demonstrate that the conversion EDV N2O, CH4 and
CREE results are less than or equal to the OEM's in-use standard for
that subconfiguration.. EPA is also proposing to continue to allow
conversion manufacturers, on a test group basis, to convert
CO2 overcompliance into CO2 equivalents of
N2O and/or CH4 that can be subtracted from the
CH4 and N2O measured values to demonstrate
compliance with CH4 and/or N2O standards.
g. Geographical Location of Greenhouse Gas Fleet Vehicles
EPA emission certification regulations require emission compliance
\366\ in the 50 states, the District of Columbia, the Puerto Rico, the
Virgin Islands, Guam, American Samoa and the Commonwealth of the
Northern Mariana Islands.
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\366\ Section 216 of the Clean Air Act defines the term commerce
to mean ``(A) commerce between any place in any State and any place
outside thereof; and (B) commerce wholly within the District of
Columbia.''
Section 302(d) of the Clean Air Act reads ``The term ``State''
means a State, the District of Columbia, the Commonwealth of Puerto
Rico, the Virgin Islands, Guam, and American Samoa and includes the
Commonwealth of the Northern Mariana Islands.'' In addition, 40 CFR
85.1502 (14) regarding the importation of motor vehicles and motor
vehicle engines defines the United States to include ``the States,
the District of Columbia, the Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana Islands, Guam, American Samoa,
and the U.S. Virgin Islands.''
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8. Warranty, Defect Reporting, and Other Emission-Related Components
Provisions
This rulemaking would retain warranty, defect reporting, and other
emission-related component provisions promulgated in the MY 2012-2016
rulemaking. Please see Section III.E.10 of the MY 2012-2016 final rule
preamble (75 FR 25486) for a discussion of these provisions.
9. Miscellaneous Technical Amendments and Corrections
EPA is proposing a number of noncontroversial amendments and
corrections to the existing regulations. Because the regulatory
provisions for the EPA greenhouse gas program, NHTSA's CAFE program,
and the joint fuel economy and environment labeling program are all
intertwined in 40 CFR Part 600, this proposed rule presents an
opportunity to make corrections and clarifications to all or any of
these programs. Consequently, a number of minor and non-substantive
corrections are being proposed to the regulations that implement these
programs.
Amendments include the following:
In section 86.135-12, we have removed references to the
model year applicability of N2O measurement. This
applicability is covered elsewhere in the regulations, and we believe
that--where possible--testing regulations should be limited to the
specifics of testing and measurement.
The definition of ``Footprint'' in 86.1803-01 is revised
to clarify measurement and rounding. The previous definition stated
that track width is ``measured in inches,'' which may inadvertently
imply measuring and recording to the nearest inch. The revised
definition clarifies that measurements should be to the nearest one
tenth of an inch, and average track width should be rounded to the
nearest tenth of an inch.
We are also proposing a solution to a situation in which a
manufacturer of a clean alternative fuel conversion is attempting to
comply with the fuel conversion regulations (see 40 CFR part 85 subpart
F) at a point in time before which certain data is available from the
original manufacturer of the vehicle. Clean alternative fuel
conversions are subject to greenhouse gas standards if the vehicle as
originally manufactured was subject to greenhouse gas standards, unless
the conversion manufacturer qualifies for exemption as a small
business. Compliance with light-duty vehicle greenhouse gas emission
standards is demonstrated by complying with the N2O and
CH4 standards and the in-use CO2 exhaust emission
standard set forth in 40 CFR 86.1818-12(d) as determined by the
original manufacturer for the subconfiguration that is identical to the
fuel conversion emission data vehicle (EDV). However, the
subconfiguration data may not be available to the fuel conversion
manufacturer at the time they are seeking EPA certification. Several
compliance options are currently provided to fuel conversion
manufacturers that are consistent with the compliance options for the
original equipment manufacturers. EPA is proposing to add another
option that would be applicable starting with the 2012 model year. The
new option would allow clean alternative fuel conversion manufacturers
to satisfy the greenhouse gas standards if the sum of CH4
plus N2O plus CREE emissions from the vehicle pre-conversion
is less than the sum post-conversion, adjusting for the global warming
potential of the constituents.
10. Base Tire Definition
One of the factors in a manufacturer's calculation of vehicle
footprint is the base tire. Footprint is based on a vehicle's wheel
base and track width, and track width in turn is ``the lateral distance
between the centerlines of the base tires at ground, including the
camber angle.'' \367\ EPA's current definition of base tire is the
``tire specified as standard equipment by the
[[Page 75089]]
manufacturer.'' \368\ EPA understands that some manufacturers may be
applying this base tire definition in different ways, which could lead
to differences across manufacturers in how they are ultimately
calculating footprints. EPA invites public comment on whether the base
tire definition should be clarified to ensure a more uniform
application across manufacturers. For example, NHTSA is proposing a
specific change to the base tire definition for the CAFE program (see
Section IV.I.5.g, and proposed 49 CFR 523.2). Because the calculation
of footprint is a fundamental aspect of both the greenhouse gas
standards and the CAFE standards, EPA welcomes comments on whether the
existing base tire definition should be clarified, and specific changes
to the definition that would address this issue.
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\367\ See 40 CFR 86.1803-01.
\368\ See 40 CFR 86.1803-01, and 40 CFR 600.002. Standard
equipment means those features or equipment which are marketed on a
vehicle over which the purchaser can exercise no choice.
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11. Treatment of Driver-Selectable Modes and Conditions
EPA is requesting comments on whether there is a need to clarify in
the regulations how EPA treats driver-selectable modes (such as multi-
mode transmissions and other user-selectable buttons or switches) that
may impact fuel economy and GHG emissions. New technologies continue to
arrive on the market, with increasing complexity and an increasing
array of ways a driver can make choices that affect the fuel economy
and greenhouse gas emissions. For example, some start-stop systems may
offer the driver the option of choosing whether or not the system is
enabled. Similarly, vehicles with ride height adjustment or grill
shutters may allow drivers to override those features.
Under the current regulations, EPA draws a distinction between
vehicles tested for purposes of CO2 emissions performance
and fuel economy and vehicles tested for non-CO2 emissions
performance. When testing emission data vehicles for certification
under Part 86 for non-CO2 emissions standards, a vehicle
that has multiple operating modes must meet the applicable emission
standards in all modes, and on all fuels. Sometimes testing may occur
in all modes, but more frequently the worst-case mode is selected for
testing to represent the emission test group. For example, a vehicle
that allows the user to disengage the start-stop capability must meet
the standards with and without the start-stop system operating (in some
cases EPA has determined that the operation of start-stop is the worst
case for emissions controlled by the catalyst because of the spike in
emissions associated with each start). Similarly, a plug-in hybrid
electric vehicle is tested in charge-sustaining (i.e., gasoline-only)
operation. Current regulations require the reporting of CO2
emissions from certification tests conducted under Part 86, but EPA
regulations also recognize that these values, from emission data
vehicles that represent a test group, are ultimately not the values
that are used to establish in-use CO2 standards (which are
established on much more detailed sub-configuration-specific level) or
the model type CO2 and fuel economy values used for fleet
averaging under Part 600.
When EPA tests vehicles for fuel economy and CO2
emissions performance, user-selectable modes are treated somewhat
differently, where the goals are different and where worst-case
operation may not be the appropriate method. For example, EPA does not
believe that the fuel economy and CO2 emissions value for a
PHEV should ignore the use of grid electricity, or that other dual fuel
vehicles should ignore the real-world use of alternative fuels that
reduce GHG emissions. The regulations address the use of utility
factors to properly weight the CO2 performance on the
conventional fuel and the alternative fuel. Similarly, non-
CO2 emission certification testing may be done in a
transmission mode that is not likely to be the predominant mode used by
consumers. Testing under Part 600 must determine a single fuel economy
value for each model type for the CAFE program and a single
CO2 value for each model type for EPA's program. With
respect to transmissions, Part 600 refers to 86.128, which states the
following:
All test conditions, except as noted, shall be run according to
the manufacturer's recommendations to the ultimate purchaser,
Provided, That: Such recommendations are representative of what may
reasonably be expected to be followed by the ultimate purchaser
under in-use conditions.
For multi-mode transmissions EPA relies on guidance letter CISD-09-
19 (December 3, 2009) to guide the determination of what is
``representative of what may reasonably be expected to be followed by
the ultimate purchaser under in-use conditions.'' If EPA can make a
determination that one mode is the ``predominant'' mode (meaning nearly
total usage), then testing may be done in that mode. However, if EPA
cannot be convinced that a single mode is predominant, then fuel
economy and GHG results from each mode are typically averaged with
equal weighting. There are also detailed provisions that explain how a
manufacturer may conduct surveys to support a statement that a given
mode is predominant. However, CISD-09-19 only addresses transmissions,
and states the following regarding other technologies:
``Please contact EPA in advance to request guidance for vehicles
equipped with future technologies not covered by this document,
unusual default strategies or driver selectable features, e.g.,
hybrid electric vehicles where the multimode button or switch
disables or modifies any fuel saving features of the vehicle (such
as the stop-start feature, air conditioning compressor operation,
electric-only operation, etc.).''
The unique operating characteristics of these technologies
essentially often requires that EPA determine fuel economy and
CO2 testing and calculations on a case-by-case basis.
Because the CAFE and CO2 programs require a single value to
represent a model type, EPA must make a decision regarding how to
account for multiple modes of operation. When a manufacturer brings
such a technology to us for consideration, we will evaluate the
technology (including possibly requiring that the manufacturer give us
a vehicle to test) and provide the manufacturer with instructions on
how to determine fuel economy and CO2 emissions. In general
we will evaluate these technologies in the same way and following the
same principles we use to evaluate transmissions under CISD-09-19,
making a determination as to whether a given operating mode is
predominant or not (using the criteria for predominance described in
CISD-09-19). These instructions are provided to the manufacturer under
the authority for special test procedures described in 40 CFR 600.111-
08. EPA would apply the same approach to testing for compliance with
the in-use CO2 standard, so testing for the CO2
fleet average and testing for compliance with the in-use CO2
standard would be consistent. EPA requests comment on whether the
current approach and regulatory provisions are sufficient, or whether
additional regulations or guidance should be developed to describe
EPA's process. EPA recognizes that ultimately no regulation can
anticipate all options, devices, and operator controls that may arrive
in the future, and adequate flexibility to address future situations is
an important attribute for fuel economy and CO2 emissions
testing.
[[Page 75090]]
F. How would this proposal reduce GHG emissions and their associated
effects?
This action is an important step towards curbing growth of GHG
emissions from cars and light trucks. In the absence of control, GHG
emissions worldwide and in the U.S. are projected to continue steady
growth. Table III-54 shows emissions of CO2, methane
(CH4), nitrous oxide (N2O) and air conditioning
refrigerant (HFC-134a) on a CO2-equivalent basis for
calendar years 2010, 2020, 2030, 2040 and 2050. As shown below, U.S.
GHGs are estimated to make up roughly 15 percent of total worldwide
emissions in 2010. Further, the contribution of direct emissions from
cars and light-trucks to this U.S. share reaches an estimated 17
percent of U.S. emissions by 2030 in the absence of control. As
discussed later in this section, this steady rise in GHG emissions is
associated with numerous adverse impacts on human health, food and
agriculture, air quality, and water and forestry resources.
[GRAPHIC] [TIFF OMITTED] TP01DE11.119
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\369\ ADAGE and GCAM model projections of worldwide and U.S. GHG
emissions are provided for context only. The baseline data in these
models differ in certain assumptions from the baseline used in this
proposal. For example, the ADAGE baseline is calibrated to AEO 2010,
which includes the EISA 35 MPG by 2020 provision, but does not
explicitly include the MYs 2012-2016 rule. All emissions data were
rounded to two significant digits.
\a\GCAM model.
\370\ Based on the Representative Concentration Pathway scenario
in GCAM available at http://www.globalchange.umd.edu/gcamrcp. See
section III.F.3 and DRIA Chapter 6.4 for additional information on
GCAM.
\b\ ADAGE model.
\371\ Based on the ADAGE reference case used in U.S. EPA (2010).
``EPA Analysis of the American Power Act of 2010'' U.S.
Environmental Protection Agency, Washington, DC, USA
(http:www.epagov/climatechange/economics/economicanalyses.html).
\c\ OMEGA model, Tailpipe CO2 and HFC134a only
(includes impacts of MYs 2012-2016 rule).
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This rule will result in significant reductions as newer, cleaner
vehicles come into the fleet. As discussed in Section I, this GHG rule
is part of a joint National Program such that a large part of the
projected benefits, but by no means all, would be achieved jointly with
NHTSA's CAFE standards, which are described in detail in Section IV.
EPA estimates the reductions attributable to the GHG program over time
assuming the model year 2025 standards continue indefinitely post-2025,
compared to a reference scenario in which the 2016 model year GHG
standards continue indefinitely beyond 2016.
EPA estimated greenhouse impacts from several sources including:
(a) The impact of the standards on tailpipe CO2 emissions,
(b) projected improvements in the efficiency of vehicle air
conditioning systems, \372\ (c) reductions in direct emissions of the
refrigerant and potent greenhouse gas HFC-134a from air conditioning
systems, (d) ``upstream'' emission reductions from gasoline extraction,
production and distribution processes as a result of reduced gasoline
demand associated with this rule, and (e) ``upstream'' emission
increases from power plants as electric powertrain vehicles increase in
prevalence as a result of this rule. EPA additionally accounted for the
greenhouse gas impacts of additional vehicle miles travelled (VMT) due
to the ``rebound'' effect discussed in Section III.H.
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\372\ While EPA anticipates that the majority of mobile air
conditioning systems will be improved in response to the MY 2012-
2016 rulemaking, the agency expects that the remainder will be
improved as a result of this action.
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Using this approach EPA estimates the proposed standards would cut
annual fleetwide car and light truck tailpipe CO2 emissions
by approximately 230 MMT or 18 percent by 2030, when 85 percent of car
and light truck miles will be travelled by vehicles meeting the MY 2017
or later standards. An additional 65 MMTCO2eq of reduced
emissions are attributable to reductions in gasoline production,
distribution and transport. 15 MMTCO2eq of additional
emissions will be attributable to increased electricity production. In
total, EPA estimates that compared to a baseline of indefinite 2016
model year standards, net GHG emission reductions from the program
would be approximately 300 million metric tons CO2-
equivalent (MMTCO2eq) annually by 2030, which represents a
reduction of 4% of total U.S. GHG emissions and 0.5% of total worldwide
GHG emissions projected in that year. These GHG savings would result in
savings of approximately 26 billion gallons of petroleum-based
gasoline.\373\
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\373\ All estimates of fuel savings presented here assume that
manufacturers use air conditioning leakage credits as part of their
compliance strategy. If these credits were not used, the fuel
savings would be larger.
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EPA projects the total reduction of the program over the full life
of model year 2017-2025 vehicles to be about 1,970 MMTCO2eq,
with fuel savings of 170 billion gallons (3.9 billion barrels) of
gasoline over the life of these vehicles.
The impacts on atmospheric CO2 concentrations, global
mean surface temperature, sea level rise, and ocean pH resulting from
these emission reductions are discussed in Section III.F.3.
[[Page 75091]]
1. Impact on GHG Emissions
The modeling of fuel savings and greenhouse gas emissions is
substantially similar to that which was conducted in the 2012-2016
Final Rulemaking and the MY 2017-2025 Interim Joint Technical
Assessment Report (TAR). As detailed in Draft RIA chapter 4, EPA
estimated calendar year tailpipe CO2 reductions based on
pre- and post-control CO2 gram per mile levels from EPA's
OMEGA model, coupled with VMT projections derived from AEO 2011 Final
Release. These estimates reflect the real-world CO2
emissions reductions projected for the entire U.S. vehicle fleet in a
specified calendar year. EPA also estimated full lifetime reductions
for model years 2017-2025 using pre- and post-control CO2
levels projected by the OMEGA model, coupled with projected vehicle
sales and lifetime mileage estimates. These estimates reflect the real-
world CO2 emissions reductions projected for model years
2017 through 2025 vehicles over their entire life. Upstream impacts
from power plant emissions came from OMEGA estimates of EV/penetration
into the fleet (approximately 3%). For both calendar year and model
year assessments, EPA estimated the environmental impact of the
advanced technology multiplier, pickup truck hybrid electric vehicle
(HEV) and performance based incentives and air conditioning credits.
The impact of the off-cycle credits were not explicitly estimated, as
these credits are assumed to be inherently environmentally neutral
(Section III.B). EPA also did not assess the impact of the credit
banking carry-forward programs.
As in the MY 2012-2016 rulemaking, this proposal allows
manufacturers to earn credits for improvements to controls for both
direct and indirect AC emissions. Since these improvements are
relatively low cost, EPA again projects that manufacturers will take
advantage of this flexibility, leading to reductions from emissions
associated with vehicle air conditioning systems. As explained above,
these reductions will come from both direct emissions of air
conditioning refrigerant over the life of the vehicle and tailpipe
CO2 emissions produced by the increased load of the A/C
system on the engine. In particular, EPA estimates that direct
emissions of HFC-134a, one of the most potent greenhouse gases, would
be fully removed from light-duty vehicles through the phase-in of
alternative refrigerants. More efficient air conditioning systems would
also lead to fuel savings and additional reductions in upstream
emissions from fuel production and distribution. Our estimated
reductions from the A/C credit program assume that manufacturers will
fully utilize the program by MY 2021.
Upstream greenhouse gas emission reductions associated with the
production and distribution of fuel were estimated using emission
factors from DOE's GREET1.8 model, with modifications as detailed in
Chapter 5 of the DRIA. These estimates include both international and
domestic emission reductions, since reductions in foreign exports of
finished gasoline and/or crude would make up a significant share of the
fuel savings resulting from the GHG standards. Thus, significant
portions of the upstream GHG emission reductions will occur outside of
the U.S.; a breakdown of projected international versus domestic
reductions is included in the DRIA.
Electricity emission factors were derived from EPA's Integrated
Planning Model (IPM). EPA uses IPM to analyze the projected impact of
environmental policies on the electric power sector in the 48
contiguous states and the District of Columbia. IPM is a multi-
regional, dynamic, deterministic linear programming model of the U.S.
electric power sector. It provides forecasts of least-cost capacity
expansion, electricity dispatch, and emission control strategies for
meeting energy demand and environmental, transmission, dispatch, and
reliability constraints. EPA derived average national CO2
emission factors from the IPM version 4.10 base case run for the
``Proposed Transport Rule.'' \374\ As discussed in Draft TSD Chapter 4,
for the Final Rulemaking, EPA may consider emission factors other than
national power generation, such as marginal power emission factors, or
regional emission factors.
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\374\ EPA. IPM. http://www.epa.gov/airmarkt/progsregs/epa-ipm/BaseCasev410.html. ``Proposed Transport Rule/NODA version'' of IPM.
TR--SB--Limited Trading v.4.10.
---------------------------------------------------------------------------
a. Calendar Year Reductions for Future Years
Table III-55 shows reductions estimated from these GHG standards
assuming a pre-control case of 2016 MY standards continuing
indefinitely beyond 2016, and a post-control case in which 2025 MY GHG
standards continue indefinitely beyond 2025. These reductions are
broken down by upstream and downstream components, including air
conditioning improvements, and also account for the offset from a 10
percent VMT ``rebound'' effect as discussed in Section III.H. Including
the reductions from upstream emissions, total reductions are estimated
to reach 297 MMTCO2eq annually by 2030, and grow to over 540
MMTCO2eq in 2050 as cleaner vehicles continue to come into
the fleet.
[[Page 75092]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.120
The total program emission reductions yield significant emission
decreases relative to worldwide and national total emissions.
[GRAPHIC] [TIFF OMITTED] TP01DE11.121
[[Page 75093]]
b. Lifetime Reductions for 2017-2025 Model Years
EPA also analyzed the emission reductions over the full life of the
2017-2025 model year cars and light trucks that would be affected by
this program.\375\ These results, including both upstream and
downstream GHG contributions, are presented in Table III-57, showing
lifetime reductions of about 2,065 MMTCO2eq.
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\375\ As detailed in DRIA Chapter 4 and TSD Chapter 4, for this
analysis the full life of the vehicle is represented by average
lifetime mileages for cars (197,000 miles [MY 2017] and 211,000
miles [MY 2025]) and trucks (235,000 miles [MY 2017] and 249,000
miles [MY 2025]). These estimates are a function of how far vehicles
are driven per year and scrappage rates.
[GRAPHIC] [TIFF OMITTED] TP01DE11.122
c. Impacts of VMT Rebound Effect
As noted above and discussed more fully in Section III.H., the
effect of a decrease in fuel cost per mile on vehicle use (VMT
``rebound'') was accounted for in our assessment of economic and
environmental impacts of this proposed rule. A 10 percent rebound case
was used for this analysis, meaning that VMT for affected model years
is modeled as increasing by 10 percent as much as the decrease in fuel
cost per mile; i.e., a 10 percent decrease in fuel cost per mile from
our proposed standards would result in a 1 percent increase in VMT.
Results are shown in Table III-58. This increase is accounted for in
the reductions presented in Table III-55 and Table III-56). The table
below compares the reductions under two different scenarios; one in
which the VMT estimate is entirely insensitive to the cost of travel,
and one in which both control and reference scenario VMT are affected
by the rebound effect. This topic is further discussed in DRIA chapter
4.
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\376\ This assessment assumes that owners of grid-electric
powered vehicles react similarly to changes int eh cost of driving s
owners of conventional gasoline vehicles. We seek comment on this
approach in Section III.H.4c.
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[[Page 75094]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.123
d. Analysis of Alternatives
EPA analyzed four alternative scenarios for this proposal (Table
III-59). EPA assumed that manufacturers would use air conditioning
improvements and the HEV and performance based pickup incentives in
identical penetrations as in the primary scenario. EPA re-estimated the
impact of the electric vehicle multiplier under each alternative. Under
these assumptions, EPA expects achieved fleetwide average emission
levels of 150 g/mile CO2 to 177 g/mile CO2eq (6%)
in 2025. As in the primary scenario, EPA assumed that the fleet
complied with the standards. For full details on modeling assumptions,
please refer to DRIA Chapter 4. EPA's assessment of these alternative
standards is discussed in Section III.D.6
[[Page 75095]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.124
[[Page 75096]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.125
2. Climate Change Impacts From GHG Emissions
The impact of GHG emissions on the climate has been reviewed in the
2012-2016 light-duty rulemaking and recent heavy-duty GHG rulemaking.
See 75 FR at 25491; 76 FR at 57294. This section briefly discusses
again some of the climate impact context for transportation emissions.
These previous discussions noted that once emitted, GHGs that are the
subject of this regulation can remain in the atmosphere for decades to
millennia, meaning that 1) their concentrations become well-mixed
throughout the global atmosphere regardless of emission origin, and 2)
their effects on climate are long lasting. GHG emissions come mainly
from the combustion of fossil fuels (coal, oil, and gas), with
additional contributions from the clearing of forests, agricultural
activities, cement production, and some industrial activities.
Transportation activities, in aggregate, were the second largest
contributor to total U.S. GHG emissions in 2009 (27 percent of total
emissions).\377\
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\377\ U.S. EPA (2011) Inventory of U.S. Greenhouse Gas Emissions
and Sinks: 1990-2009. EPA 430-R-11-005. (Docket EPA-HQ-OAR-2010-
0799).
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The Administrator relied on thorough and peer-reviewed assessments
of climate change science prepared by the Intergovernmental Panel on
Climate Change (``IPCC''), the United States Global Change Research
Program (``USGCRP''), and the National Research Council of the National
Academies (``NRC'') \378\ as the primary scientific and technical basis
for the Endangerment and Cause or Contribute Findings for Greenhouse
Gases Under Section 202(a) of the Clean Air Act (74 FR 66496, December
15, 2009). These assessments comprehensively address the scientific
issues the Administrator had to examine, providing her both data and
information on a wide range of issues pertinent to the Endangerment
Finding. These assessments have been rigorously reviewed by the expert
community, and also by United States government agencies and
scientists, including by EPA itself.
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\378\ For a complete list of core references from IPCC, USGCRP/
CCSP, NRC and others relied upon for development of the TSD for
EPA's Endangerment and Cause or Contribute Findings see section
1(b), specifically, Table 1.1 of the TSD. (Docket EPA-HQ-OAR-2010-
0799).
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Based on these assessments, the Administrator determined, in
essence, that greenhouse gases cause warming; that levels of greenhouse
gases are increasing in the atmosphere due to human activity; the
climate is warming; recent warming has been attributed to the increase
in greenhouse gases; and that warming of the climate threatens human
health and welfare. The Administrator further found that emissions of
well-mixed greenhouse gases from new motor vehicles and engines
contribute to the air pollution for which the endangerment finding was
made. Specifically, the Administrator found under section 202(a) of the
Act that six greenhouse gases (carbon dioxide, methane, nitrous oxide,
hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride) taken in
combination endanger both the public health and the public welfare of
current and future generations, and further found that the combined
emissions of these greenhouse gases from new motor vehicles and engines
contribute to the greenhouse gas air pollution that endangers public
health and welfare.
More recent assessments have produced similar conclusions to those
of the assessments upon which the Administrator relied. In May 2010,
the NRC published its comprehensive assessment, ``Advancing the Science
of Climate Change.'' \379\ It concluded that ``climate change is
occurring, is caused largely by human activities, and poses significant
risks for--and in many cases is already affecting--a broad range of
human and natural systems.'' Furthermore, the NRC stated that this
conclusion is based on findings that are ``consistent with the
conclusions of recent assessments by the U.S. Global Change Research
Program, the Intergovernmental Panel on Climate Change's Fourth
Assessment Report, and other assessments of the state of scientific
knowledge on climate change.'' These are the same assessments that
served as the primary scientific references underlying the
Administrator's Endangerment Finding. Another NRC assessment, ``Climate
Stabilization Targets: Emissions, Concentrations, and Impacts over
Decades to Millennia,'' was published
[[Page 75097]]
in 2011. This report found that climate change due to carbon dioxide
emissions will persist for many centuries. The report also estimates a
number of specific climate change impacts, finding that every degree
Celsius (C) of warming could lead to increases in the heaviest 15% of
daily rainfalls of 3 to 10%, decreases of 5 to 15% in yields for a
number of crops (absent adaptation measures that do not presently
exist), decreases of Arctic sea ice extent of 25% in September and 15%
annually averaged, along with changes in precipitation and streamflow
of 5 to 10% in many regions and river basins (increases in some
regions, decreases in others). The assessment also found that for an
increase of 4 degrees C nearly all land areas would experience summers
warmer than all but 5% of summers in the 20th century, that for an
increase of 1 to 2 degrees C the area burnt by wildfires in western
North America will likely more than double, that coral bleaching and
erosion will increase due both to warming and ocean acidification, and
that sea level will rise 1.6 to 3.3 feet by 2100 in a 3 degree C
scenario. The assessment notes that many important aspects of climate
change are difficult to quantify but that the risk of adverse impacts
is likely to increase with increasing temperature, and that the risk of
abrupt climate changes can be expected to increase with the duration
and magnitude of the warming.
---------------------------------------------------------------------------
\379\ National Research Council (NRC) (2010). Advancing the
Science of Climate Change. National Academy Press. Washington, DC.
(Docket EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------
In the 2010 report cited above, the NRC stated that some of the
largest potential risks associated with future climate change may come
not from relatively smooth changes that are reasonably well understood,
but from extreme events, abrupt changes, and surprises that might occur
when climate or environmental system thresholds are crossed. Examples
cited as warranting more research include the release of large
quantities of GHGs stored in permafrost (frozen soils) across the
Arctic, rapid disintegration of the major ice sheets, irreversible
drying and desertification in the subtropics, changes in ocean
circulation, and the rapid release of destabilized methane hydrates in
the oceans.
On ocean acidification, the same report noted the potential for
broad, ``catastrophic'' impacts on marine ecosystems. Ocean acidity has
increased 25 percent since pre-industrial times, and is projected to
continue increasing. By the time atmospheric CO2 content
doubles over its preindustrial value, there would be virtually no place
left in the ocean that can sustain coral reef growth. Ocean
acidification could have dramatic consequences for polar food webs
including salmon, the report said.
Importantly, these recent NRC assessments represent another
independent and critical inquiry of the state of climate change
science, separate and apart from the previous IPCC and USGCRP
assessments.
3. Changes in Global Climate Indicators Associated With the Proposal's
GHG Emissions Reductions
EPA examined \380\ the reductions in CO2 and other GHGs
associated with this rulemaking and analyzed the projected effects on
atmospheric CO2 concentrations, global mean surface
temperature, sea level rise, and ocean pH which are common variables
used as indicators of climate change.\381\ The analysis projects that
the proposed rule, if adopted, will reduce atmospheric concentrations
of CO2, global climate warming, ocean acidification, and sea
level rise relative to the reference case. Although the projected
reductions and improvements are small in comparison to the total
projected climate change, they are quantifiable, directionally
consistent, and will contribute to reducing the risks associated with
climate change. Climate change is a global phenomenon and EPA
recognizes that this one national action alone will not prevent it: EPA
notes this would be true for any given GHG mitigation action when taken
alone or when considered in isolation. EPA also notes that a
substantial portion of CO2 emitted into the atmosphere is
not removed by natural processes for millennia, and therefore each unit
of CO2 not emitted into the atmosphere due to this rule
avoids essentially permanent climate change on centennial time scales.
---------------------------------------------------------------------------
\380\ Using the Model for the Assessment of Greenhouse Gas
Induced Climate Change (MAGICC) 5.3v2, http://www.cgd.ucar.edu/cas/wigley/magicc/ magicc/), EPA estimated the effects of this rulemaking's
greenhouse gas emissions reductions on global mean temperature and
sea level. Please refer to Chapter 6.4 of the DRIA for additional
information.
\381\ Due to timing constraints, this analysis was conducted
with preliminary estimates of the emissions reductions projected
from this proposal, which were similar to the final estimates.
---------------------------------------------------------------------------
EPA determines that the projected reductions in atmospheric
CO2, global mean temperature and sea level rise are
meaningful in the context of this proposed action. In addition, EPA has
conducted an analysis to evaluate the projected changes in ocean pH in
the context of the changes in emissions from this rulemaking. The
results of the analysis demonstrate that relative to the reference
case, projected atmospheric CO2 concentrations are estimated
by 2100 to be reduced by 3.29 to 3.68 part per million by volume
(ppmv), global mean temperature is estimated to be reduced by 0.0076 to
0.0184 [deg]C, and sea-level rise is projected to be reduced by
approximately 0.074-0.166 cm, based on a range of climate
sensitivities. The analysis also demonstrates that ocean pH will
increase by 0.0018 pH units by 2100 relative to the reference case.
a. Estimated Reductions in Atmospheric CO2 Concentration,
Global Mean Surface Temperatures, Sea Level Rise, and Ocean pH
EPA estimated changes in the atmospheric CO2
concentration, global mean temperature, and sea level rise out to 2100
resulting from the emissions reductions in this rulemaking using the
Global Change Assessment Model (GCAM, formerly MiniCAM), integrated
assessment model \382\ coupled with the Model for the Assessment of
Greenhouse Gas Induced Climate Change (MAGICC, version 5.3v2).\383\
GCAM was used to create the globally and temporally consistent set of
climate relevant variables required for running MAGICC. MAGICC was then
used to estimate the projected change in these variables over time.
Given the magnitude of the estimated emissions reductions associated
with this action, a simple climate model such as MAGICC is reasonable
for estimating the atmospheric and climate response. This widely used,
peer reviewed modeling tool was also used to project temperature and
sea level rise under different emissions scenarios in the Third and
Fourth Assessments of the IPCC.
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\382\ GCAM is a long-term, global integrated assessment model of
energy, economy, agriculture and land use, that considers the
sources of emissions of a suite of GHGs, emitted in 14 globally
disaggregated regions, the fate of emissions to the atmosphere, and
the consequences of changing concentrations of greenhouse related
gases for climate change. GCAM begins with a representation of
demographic and economic developments in each region and combines
these with assumptions about technology development to describe an
internally consistent representation of energy, agriculture, land-
use, and economic developments that in turn shape global emissions.
Brenkert A, S. Smith, S. Kim, and H. Pitcher, 2003: Model
Documentation for the MiniCAM. PNNL-14337, Pacific Northwest
National Laboratory, Richland, Washington. (Docket EPA-HQ-OAR-2010-
0799).
\383\ Wigley, T.M.L. 2008. MAGICC 5.3.v2 User Manual. UCAR--
Climate and Global Dynamics Division, Boulder, Colorado. http://www.cgd.ucar.edu/cas/wigley/magicc/ (Docket EPA-HQ-OAR-2010-0799).
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The integrated impact of the following pollutant and greenhouse gas
emissions changes are considered: CO2, CH4,
N2O, HFC-134a, NOX, CO, SO2, and
volatile organic compounds (VOC). For these pollutants an annual time-
series of (upstream + downstream) emissions
[[Page 75098]]
reductions estimated from the rulemaking were applied as net reductions
to a global reference case (or baseline) emissions scenario in GCAM to
generate an emissions scenario specific to this proposed rule.\384\ The
emissions reductions past 2050 for all gases were scaled with total
U.S. road transportation fuel consumption from the GCAM reference
scenario. Road transport fuel consumption past 2050 does not change
significantly and thus emissions reductions remain relatively constant
from 2050 through 2100. Specific details about the GCAM reference case
scenario can be found in Chapter 6.4 of the DRIA that accompanies this
proposal.
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\384\ Due to timing constraints, this analysis was conducted
with preliminary estimates of the emissions reductions projected
from this proposal, which were similar to the final estimates.
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MAGICC calculates the forcing response at the global scale from
changes in atmospheric concentrations of CO2,
CH4, N2O, HFCs, and tropospheric ozone
(O3). It also includes the effects of temperature changes on
stratospheric ozone and the effects of CH4 emissions on
stratospheric water vapor. Changes in CH4, NOX,
VOC, and CO emissions affect both O3 concentrations and
CH4 concentrations. MAGICC includes the relative climate
forcing effects of changes in sulfate concentrations due to changing
SO2 emissions, including both the direct effect of sulfate
particles and the indirect effects related to cloud interactions.
However, MAGICC does not calculate the effect of changes in
concentrations of other aerosols such as nitrates, black carbon, or
organic carbon, making the assumption that the sulfate cooling effect
is a proxy for the sum of all the aerosol effects. Therefore, the
climate effects of changes in PM2.5 emissions and precursors
(besides SO2) which are presented in the DRIA Chapter 6 were
not included in the calculations in this chapter. MAGICC also
calculates all climate effects at the global scale. This global scale
captures the climate effects of the long-lived, well-mixed greenhouse
gases, but does not address the fact that short-lived climate forcers
such as aerosols and ozone can have effects that vary with location and
timing of emissions. Black carbon in particular is known to cause a
positive forcing or warming effect by absorbing incoming solar
radiation, but there are uncertainties about the magnitude of that
warming effect and the interaction of black carbon (and other co-
emitted aerosol species) with clouds. While black carbon is likely to
be an important contributor to climate change, it would be premature to
include quantification of black carbon climate impacts in an analysis
of these proposed standards. See generally, EPA, Response to Comments
to the Endangerment Finding Vol. 9 section 9.1.6.1 and the discussion
of black carbon in the endangerment finding at 74 FR at 66520.
Additionally, the magnitude of PM2.5 emissions changes (and
therefore, black carbon emission changes) related to these proposed
standards are small in comparison to the changes in the pollutants
which have been included in the MAGICC model simulations.
Changes in atmospheric CO2 concentration, global mean
temperature, and sea level rise for both the reference case and the
emissions scenarios associated with this action were computed using
MAGICC. To calculate the reductions in the atmospheric CO2
concentrations as well as in temperature and sea level resulting from
this proposal, the output from the policy scenario associated with
EPA's proposed standards was subtracted from an existing Global Change
Assessment Model (GCAM, formerly MiniCAM) reference emission scenario.
To capture some key uncertainties in the climate system with the MAGICC
model, changes in atmospheric CO2, global mean temperature
and sea level rise were projected across the most current IPCC range of
climate sensitivities, from 1.5 [deg]C to 6.0 [deg]C.\385\ This range
reflects the uncertainty for equilibrium climate sensitivity for how
much global mean temperature would rise if the concentration of carbon
dioxide in the atmosphere were to double. The information for this
range come from constraints from past climate change on various time
scales, and the spread of results for climate sensitivity from
ensembles of models.\386\ Details about this modeling analysis can be
found in the DRIA Chapter 6.4.
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\385\ In IPCC reports, equilibrium climate sensitivity refers to
the equilibrium change in the annual mean global surface temperature
following a doubling of the atmospheric equivalent carbon dioxide
concentration. The IPCC states that climate sensitivity is
``likely'' to be in the range of 2 [deg]C to 4.5 [deg]C, ``very
unlikely'' to be less than 1.5 [deg]C, and ``values substantially
higher than 4.5 [deg]C cannot be excluded.'' IPCC WGI, 2007, Climate
Change 2007--The Physical Science Basis, Contribution of Working
Group I to the Fourth Assessment Report of the IPCC, http://www.ipcc.ch/ (Docket EPA-HQ-OAR-2010-0799).
\386\ Meehl, G.A. et al. (2007) Global Climate Projections. In:
Climate Change 2007: The Physical Science Basis. Contribution of
Working Group I to the Fourth Assessment Report of the
Intergovernmental Panel on Climate Change [Solomon, S., D. Qin, M.
Manning, Z. Chen, M. Marquis, K.B. Averyt, M. Tignor and H.L. Miller
(eds.)]. Cambridge University Press, Cambridge, United Kingdom and
New York, NY, USA. (Docket EPA-HQ-OAR-2010-0799).
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The results of this modeling, summarized in Table III-62, show
small, but quantifiable, reductions in atmospheric CO2
concentrations, projected global mean temperature and sea level
resulting from this action, across all climate sensitivities. As a
result of the emission reductions from the proposed standards, relative
to the reference case the atmospheric CO2 concentration is
projected to be reduced by 3.29-3.68 ppmv by 2100, the global mean
temperature is projected to be reduced by approximately 0.0076-0.0184
[deg]C by 2100, and global mean sea level rise is projected to be
reduced by approximately 0.074-0.166 cm by 2100. The range of
reductions in global mean temperature and sea level rise is larger than
that for CO2 concentrations because CO2
concentrations are only weakly coupled to climate sensitivity through
the dependence on temperature of the rate of ocean absorption of
CO2, whereas the magnitude of temperature change response to
CO2 changes (and therefore sea level rise) is more tightly
coupled to climate sensitivity in the MAGICC model.
[[Page 75099]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.126
The projected reductions are small relative to the change in
temperature (1.8-4.8 [deg]C), sea level rise (23-55 cm), and ocean
acidity (-0.30 pH units) from 1990 to 2100 from the MAGICC simulations
for the GCAM reference case. However, this is to be expected given the
magnitude of emissions reductions expected from the program in the
context of global emissions. This uncertainty range does not include
the effects of uncertainty in future emissions. It should also be noted
that the calculations in MAGICC do not include the possible effects of
accelerated ice flow in Greenland and/or Antarctica: the recent NRC
report estimated a likely sea level increase for a business-as-usual
scenario of 0.5 to 1.0 meters.\387\ Further discussion of EPA's
modeling analysis is found in the DRIA, Chapter 6.
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\387\ National Research Council (NRC), 2011. Climate
Stabilization Targets: Emissions, Concentrations, and Impacts over
Decades to Millennia. Washington, DC: National Academies Press.
(Docket EPA-HQ-OAR-2010-0799).
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EPA used the computer program CO2SYS,\388\ version 1.05, to
estimate projected changes in ocean pH for tropical waters based on the
atmospheric CO2 concentration change (reduction) resulting
from this proposal. The program performs calculations relating
parameters of the CO2 system in seawater. EPA used the
program to calculate ocean pH as a function of atmospheric
CO2 concentrations, among other specified input conditions.
Based on the projected atmospheric CO2 concentration
reductions resulting from this proposal, the program calculates an
increase in ocean pH of 0.0018 pH units in 2100 relative to the
reference case (compared to a decrease of 0.3 pH units from 1990 to
2100 in the reference case). Thus, this analysis indicates the
projected decrease in atmospheric CO2 concentrations from
the program will result in an increase in ocean pH. For additional
validation, results were generated using different known constants from
the literature. A comprehensive discussion of the modeling analysis
associated with ocean pH is provided in the DRIA, Chapter 6.
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\388\ Lewis, E., and D. W. R. Wallace. 1998. Program Developed
for CO2 System Calculations. ORNL/CDIAC-105. Carbon
Dioxide Information Analysis Center, Oak Ridge National Laboratory,
U.S. Department of Energy, Oak Ridge, Tennessee. (Docket EPA-HQ-OAR-
2010-0799).
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As discussed in III.F.2, the 2011 NRC assessment on ``Climate
Stabilization Targets: Emissions, Concentrations, and Impacts over
Decades to Millennia'' determined how a number of climate impacts--such
as heaviest daily rainfalls, crop yields, and Arctic sea ice extent--
would change with a temperature change of 1 degree Celsius (C) of
warming. These relationships of impacts with temperature change could
be combined with the calculated reductions in warming in Table III-56
to estimate changes in these impacts associated with this rulemaking.
b. Program's Effect on Climate
As a substantial portion of CO2 emitted into the
atmosphere is not removed by natural processes for millennia, each unit
of CO2 not emitted into the atmosphere avoids essentially
permanent climate change on centennial time scales. Reductions in
emissions in the near-term are important in determining long-term
climate stabilization and associated impacts experienced not just over
the next decades but in the coming centuries and millennia.\389\ Though
the magnitude of the avoided climate change projected here is small in
comparison to the total projected changes, these reductions represent a
reduction in the adverse risks associated with climate change (though
these risks were not formally estimated for this action) across a range
of equilibrium climate sensitivities.
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\389\ National Research Council (NRC) (2011). Climate
Stabilization Targets: Emissions, Concentrations, and Impacts over
Decades to Millennia. National Academy Press. Washington, DC.
(Docket EPA-HQ-OAR-2010-0799).
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EPA's analysis of the program's impact on global climate conditions
is intended to quantify these potential reductions using the best
available science. EPA's modeling results show repeatable, consistent
reductions relative to the reference case in changes of CO2
concentration, temperature, sea-level rise, and ocean pH over the next
century.
G. How would the proposal impact non-GHG emissions and their associated
effects?
Although this rule focuses on GHGs, it will also have an impact on
non-GHG pollutants. Sections G.1 of this preamble details the criteria
pollutant and air toxic inventory changes of this proposed rule. The
following sections, G.2 and G.3, discuss the health and environmental
effects associated with
[[Page 75100]]
the criteria and toxic air pollutants that are being impacted by this
proposed rule. In Section G.4 we discuss the potential impact of this
proposal on concentrations of criteria and air toxic pollutants in the
ambient air. The tools and methodologies used in this analysis are
substantially similar to those used in the MYs 2012-2016 light duty
rulemaking.
1. Inventory
a. Impacts
In addition to reducing the emissions of greenhouse gases, this
rule would influence ``non-GHG'' pollutants, i.e., ``criteria'' air
pollutants and their precursors, and air toxics. The proposal would
affect emissions of carbon monoxide (CO), fine particulate matter
(PM2.5), sulfur dioxide (SOX), volatile organic
compounds (VOC), nitrogen oxides (NOX), benzene, 1,3-
butadiene, formaldehyde, acetaldehyde, and acrolein. Our estimates of
these non-GHG emission impacts from the GHG program are shown by
pollutant in Table III.G-1 and Table III.G-2 both in total and broken
down by the three drivers of these changes: a) ``downstream'' emission
changes, reflecting the estimated effects of VMT rebound (discussed in
Sections III.F and III.H) and decreased consumption of fuel; b)
``upstream'' emission reductions due to decreased extraction,
production and distribution of motor vehicle gasoline; c) ``upstream''
emission increases from power plants as electric powertrain vehicles
increase in prevalence as a result of this rule. Program impacts on
criteria and toxics emissions are discussed below, followed by
individual discussions of the methodology used to calculate each of
these three sources of impacts.
As shown in Table III-63, EPA estimates that the proposed light
duty vehicle program would result in reductions of NOX, VOC,
PM2.5 and SOX, but would increase CO
emissions.\390\ For NOX, VOC, and PM2.5, we
estimate net reductions because the net emissions reductions from
reduced fuel refining, distribution and transport is larger than the
emission increases due to increased VMT and increased electricity
production. In the case of CO, we estimate slight emission increases,
because there are relatively small reductions in upstream emissions,
and thus the projected emission increases due to VMT rebound and
electricity production are greater than the projected emission
decreases due to reduced fuel production. For SOX,
downstream emissions are roughly proportional to fuel consumption,
therefore a decrease is seen in both downstream and fuel refining
sources.
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\390\ While estimates for CY 2020 and 2030 are shown here,
estimates through 2050 are shown in RIA Ch. 4.
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For all criteria pollutants the overall impact of the proposed
program would be small compared to total U.S. inventories across all
sectors. In 2030, EPA estimates that the program would reduce total
NOX, PM and SOX inventories by 0.1 to 0.8 percent
and reduce the VOC inventory by 1.1 percent, while increasing the total
national CO inventory by 0.5 percent.
As shown in Table III-64, EPA estimates that the proposed program
would result in similarly small changes for air toxic emissions
compared to total U.S. inventories across all sectors. In 2030, EPA
estimates the proposed program would increase total 1,3 butadiene and
acetaldehyde emissions by 0.1 to 0.4 percent. Total acrolein, benzene
and formaldehyde emissions would decrease by similarly small amounts.
[[Page 75101]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.127
[[Page 75102]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.128
b. Methodology
As in the MYs 2012-2016 rulemaking, for the downstream analysis,
the current version of the EPA motor vehicle emission simulator
(MOVES2010a) was used to estimate base VOC, CO, NOX, PM and
air toxics emission rates. Additional emissions from light duty cars
and trucks attributable to the rebound effect were then calculated
using the OMEGA model post-processor. A more complete discussion of the
inputs, methodology, and results is contained in RIA Chapter 4.
This proposal assumes that MY 2017 and later vehicles are compliant
with the agency's Tier 2 emission standards. This proposal does not
model any future Tier 3 emission standards, because these standards
have not yet been proposed (see Section III.A). We intend for the
analysis assessing the impacts of both the final Tier 3 emission
standards and the final 2017-2025 LD GHG to be included in the final
Tier 3 rule. For the proposals, we are taking care to coordinate the
modeling of each rule to
[[Page 75103]]
properly assess the air quality impact of each action independently
without double counting.
As in the MYs 2012-2016 GHG rulemaking, for this analysis we
attribute decreased fuel consumption from this program to petroleum-
based fuels only, while assuming no effect on volumes of ethanol and
other renewable fuels because they are mandated under the Renewable
Fuel Standard (RFS2). For the purposes of this emission analysis, we
assume that all gasoline in the timeframe of the analysis is blended
with 10 percent ethanol (E10). However, as a consequence of the fixed
volume of renewable fuels mandated in the RFS2 rulemaking and the
decreasing petroleum consumption predicted here, we anticipate that
this proposal would in fact increase the fraction of the U.S. fuel
supply that is made up by renewable fuels. Although we are not modeling
this effect in our analysis of this proposal, the Tier 3 rulemaking
will make more refined assumptions about future fuel properties,
including (in a final Tier 3 rule) accounting for the impacts of the LD
GHG rule. In this rulemaking EPA modeled the three impacts on criteria
pollutant emissions (rebound driving, changes in fuel production, and
changes in electricity production) discussed above.
While electric vehicles have zero tailpipe emissions, EPA assumes
that manufacturers will plan for these vehicles in their regulatory
compliance strategy for non-GHG emissions standards, and will not over-
comply with those standards. Since the Tier 2 emissions standards are
fleet-average standards, we assume that if a manufacturer introduces
EVs into its fleet, that it would correspondingly compensate through
changes to vehicles elsewhere in its fleet, rather than meet an overall
lower fleet-average emissions level.\391\ Consequently, EPA assumes
neither tailpipe pollutant benefit (other than CO2) nor an
evaporative emission benefit from the introduction of electric vehicles
into the fleet. Other factors which may impact downstream non-GHG
emissions, but are not estimated in this analysis, include: The
potential for decreased criteria pollutant emissions due to increased
air conditioner efficiency; reduced refueling emissions due to less
frequent refueling events and reduced annual refueling volumes
resulting from the GHG standards; and increased hot soak evaporative
emissions due to the likely increase in number of trips associated with
VMT rebound modeled in this proposal. In all, these additional analyses
would likely result in small changes relative to the national
inventory.
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\391\ Historically, manufacturers have reduced precious metal
loading in catalysts in order to reduce costs. See http://www.platinum.matthey.com/media-room/our-view-on-.-.-./thrifting-of-precious-metals-in-autocatalysts/ Accessed 11/08/2011.
Alternatively, manufacturers could also modify vehicle calibration.
---------------------------------------------------------------------------
To determine the upstream fuel production impacts, EPA estimated
the impact of reduced petroleum volumes on the extraction and
transportation of crude oil as well as the production and distribution
of finished gasoline. For the purpose of assessing domestic-only
emission reductions it was necessary to estimate the fraction of fuel
savings attributable to domestic finished gasoline, and of this
gasoline what fraction is produced from domestic crude. For this
analysis EPA estimated that 50 percent of fuel savings is attributable
to domestic finished gasoline and that 90 percent of this gasoline
originated from imported crude. Emission factors for most upstream
emission sources are based on the GREET1.8 model, developed by DOE's
Argonne National Laboratory,\392\ but in some cases the GREET values
were modified or updated by EPA to be consistent with the National
Emission Inventory (NEI).\393\ The primary updates for this analysis
were to incorporate newer information on gasoline distribution
emissions for VOC from the NEI, which were significantly higher than
GREET estimates; and the incorporation of upstream emission factors for
the air toxics estimated in this analysis: benzene, 1,3-butadiene,
acetaldehyde, acrolein, and formaldehyde. The development of these
emission factors is detailed in a memo to the docket. These emission
factors were incorporated into the OMEGA post-processor.
---------------------------------------------------------------------------
\392\ Greenhouse Gas, Regulated Emissions, and Energy Use in
Transportation model (GREET), U.S. Department of Energy, Argonne
National Laboratory, http://www.transportation.anl.gov/modeling_simulation/GREET/.
\393\ U.S. EPA. 2002 National Emissions Inventory (NEI) Data and
Documentation, http://www.epa.gov/ttn/chief/net/2002inventory.html.
---------------------------------------------------------------------------
As with the GHG emission analysis discussed in section III.F,
electricity emission factors were derived from EPA's Integrated
Planning Model (IPM). EPA uses IPM to analyze the projected impact of
environmental policies on the electric power sector in the 48
contiguous states and the District of Columbia. IPM is a multi-
regional, dynamic, deterministic linear programming model of the U.S.
electric power sector. It provides forecasts of least-cost capacity
expansion, electricity dispatch, and emission control strategies for
meeting energy demand and environmental, transmission, dispatch, and
reliability constraints. EPA derived average national CO2
emission factors from the IPM version 4.10 run for the ``Proposed
Transport Rule.'' \394\ As discussed in Draft TSD Chapter 4, for the
Final Rulemaking, EPA may consider emission factors other than national
power generation, such as marginal power emission factors, or regional
emission factors.
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\394\ EPA. IPM. http://www.epa.gov/airmarkt/progsregs/epa-ipm/BaseCasev410.html. ``Proposed Transport Rule/NODA version'' of IPM.
TR--SB--Limited Trading v.4.10.
---------------------------------------------------------------------------
2. Health Effects of Non-GHG Pollutants
In this section we discuss health effects associated with exposure
to some of the criteria and air toxic pollutants impacted by the
proposed vehicle standards.
a. Particulate Matter
i. Background
Particulate matter is a generic term for a broad class of
chemically and physically diverse substances. It can be principally
characterized as discrete particles that exist in the condensed (liquid
or solid) phase spanning several orders of magnitude in size. Since
1987, EPA has delineated that subset of inhalable particles small
enough to penetrate to the thoracic region (including the
tracheobronchial and alveolar regions) of the respiratory tract
(referred to as thoracic particles).\395\ Current National Ambient Air
Quality Standards (NAAQS) use PM2.5 as the indicator for
fine particles (with PM2.5 generally referring to particles
with a nominal mean aerodynamic diameter less than or equal to 2.5
micrometers ([micro]m), and use PM10 as the indicator for
purposes of regulating the coarse fraction of PM10 (referred
to as thoracic coarse particles or coarse-fraction particles; generally
including particles with a nominal mean aerodynamic diameter greater
than 2.5 [micro]m and less than or equal to 10 [micro]m, or
PM10-2.5). Ultrafine particles are a subset of fine
particles, generally less than 100 nanometers (0.1 [mu]m) in diameter.
---------------------------------------------------------------------------
\395\ Regulatory definitions of PM size fractions, and
information on reference and equivalent methods for measuring PM in
ambient air, are provided in 40 CFR parts 50, 53, and 58.
---------------------------------------------------------------------------
Fine particles are produced primarily by combustion processes and
by transformations of gaseous emissions (e.g., sulfur oxides
(SOX), nitrogen oxides (NOX), and volatile
organic compounds (VOC)) in the atmosphere. The chemical and physical
properties of PM2.5 may vary greatly with time, region,
meteorology, and source
[[Page 75104]]
category. Thus, PM2.5 may include a complex mixture of
different components including sulfates, nitrates, organic compounds,
elemental carbon and metal compounds. These particles can remain in the
atmosphere for days to weeks and travel hundreds to thousands of
kilometers.
ii. Health Effects of Particulate Matter
Scientific studies show ambient PM is associated with a series of
adverse health effects. These health effects are discussed in detail in
EPA's Integrated Science Assessment (ISA) for Particulate Matter.\396\
Further discussion of health effects associated with PM can also be
found in the draft RIA. The ISA summarizes health effects evidence
associated with both short-term and long-term exposures to
PM2.5, PM10-2.5, and ultrafine particles.
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\396\ U.S. EPA (2009) Integrated Science Assessment for
Particulate Matter (Final Report). U.S. Environmental Protection
Agency, Washington, DC, EPA/600/R-08/139F, Docket EPA-HQ-OAR-2010-
0799.
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The ISA concludes that health effects associated with short-term
exposures (hours to days) to ambient PM2.5 include
mortality, cardiovascular effects, such as altered vasomotor function
and hospital admissions and emergency department visits for ischemic
heart disease and congestive heart failure, and respiratory effects,
such as exacerbation of asthma symptoms in children and hospital
admissions and emergency department visits for chronic obstructive
pulmonary disease and respiratory infections.\397\ The ISA notes that
long-term exposure (months to years) to PM2.5 is associated
with the development/progression of cardiovascular disease, premature
mortality, and respiratory effects, including reduced lung function
growth, increased respiratory symptoms, and asthma development.\398\
The ISA concludes that the currently available scientific evidence from
epidemiologic, controlled human exposure, and toxicological studies
supports a causal association between short- and long-term exposures to
PM2.5 and cardiovascular effects and mortality. Furthermore,
the ISA concludes that the collective evidence supports likely causal
associations between short- and long-term PM2.5 exposures
and respiratory effects. The ISA also concludes that the scientific
evidence is suggestive of a causal association for reproductive and
developmental effects and cancer, mutagenicity, and genotoxicity and
long-term exposure to PM2.5.\399\
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\397\ See U.S. EPA, 2009 Final PM ISA, Note 396, at Section
2.3.1.1.
\398\ See U.S. EPA 2009 Final PM ISA, Note 396, at page 2-12,
Sections 7.3.1.1 and 7.3.2.1.
\399\ See U.S. EPA 2009 Final PM ISA, Note 396, at Section
2.3.2.
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For PM10-2.5, the ISA concludes that the current
evidence is suggestive of a causal relationship between short-term
exposures and cardiovascular effects. There is also suggestive evidence
of a causal relationship between short-term PM10-2.5
exposure and mortality and respiratory effects. Data are inadequate to
draw conclusions regarding the health effects associated with long-term
exposure to PM10-2.5.\400\
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\400\ See U.S. EPA 2009 Final PM ISA, Note 396, at Section
2.3.4, Table 2-6.
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For ultrafine particles, the ISA concludes that there is suggestive
evidence of a causal relationship between short-term exposures and
cardiovascular effects, such as changes in heart rhythm and blood
vessel function. It also concludes that there is suggestive evidence of
association between short-term exposure to ultrafine particles and
respiratory effects. Data are inadequate to draw conclusions regarding
the health effects associated with long-term exposure to ultrafine
particles.\401\
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\401\ See U.S. EPA 2009 Final PM ISA, Note 396, at Section
2.3.5, Table 2-6.
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b. Ozone
i. Background
Ground-level ozone pollution is typically formed by the reaction of
VOC and NOX in the lower atmosphere in the presence of
sunlight. These pollutants, often referred to as ozone precursors, are
emitted by many types of pollution sources, such as highway and nonroad
motor vehicles and engines, power plants, chemical plants, refineries,
makers of consumer and commercial products, industrial facilities, and
smaller area sources.
The science of ozone formation, transport, and accumulation is
complex. Ground-level ozone is produced and destroyed in a cyclical set
of chemical reactions, many of which are sensitive to temperature and
sunlight. When ambient temperatures and sunlight levels remain high for
several days and the air is relatively stagnant, ozone and its
precursors can build up and result in more ozone than typically occurs
on a single high-temperature day. Ozone can be transported hundreds of
miles downwind from precursor emissions, resulting in elevated ozone
levels even in areas with low local VOC or NOX emissions.
ii. Health Effects of Ozone
The health and welfare effects of ozone are well documented and are
assessed in EPA's 2006 Air Quality Criteria Document and 2007 Staff
Paper.402 403 People who are more susceptible to effects
associated with exposure to ozone can include children, the elderly,
and individuals with respiratory disease such as asthma. Those with
greater exposures to ozone, for instance due to time spent outdoors
(e.g., children and outdoor workers), are of particular concern. Ozone
can irritate the respiratory system, causing coughing, throat
irritation, and breathing discomfort. Ozone can reduce lung function
and cause pulmonary inflammation in healthy individuals. Ozone can also
aggravate asthma, leading to more asthma attacks that require medical
attention and/or the use of additional medication. Thus, ambient ozone
may cause both healthy and asthmatic individuals to limit their outdoor
activities. In addition, there is suggestive evidence of a contribution
of ozone to cardiovascular-related morbidity and highly suggestive
evidence that short-term ozone exposure directly or indirectly
contributes to non-accidental and cardiopulmonary-related mortality,
but additional research is needed to clarify the underlying mechanisms
causing these effects. In a report on the estimation of ozone-related
premature mortality published by NRC, a panel of experts and reviewers
concluded that short-term exposure to ambient ozone is likely to
contribute to premature deaths and that ozone-related mortality should
be included in estimates of the health benefits of reducing ozone
exposure.\404\ Animal toxicological evidence indicates that with
repeated exposure, ozone can inflame and damage the lining of the
lungs, which may lead to permanent changes in lung tissue and
irreversible reductions in lung function. The respiratory effects
observed in controlled human exposure studies and animal studies are
coherent with the evidence from epidemiologic studies supporting a
causal relationship between acute ambient ozone exposures and increased
respiratory-related emergency room visits and
[[Page 75105]]
hospitalizations in the warm season. In addition, there is suggestive
evidence of a contribution of ozone to cardiovascular-related morbidity
and non-accidental and cardiopulmonary mortality.
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\402\ U.S. EPA. (2006). Air Quality Criteria for Ozone and
Related Photochemical Oxidants (Final). EPA/600/R-05/004aF-cF.
Washington, DC: U.S. EPA. Docket EPA-HQ-OAR-2010-0799.
\403\ U.S. EPA. (2007). Review of the National Ambient Air
Quality Standards for Ozone: Policy Assessment of Scientific and
Technical Information, OAQPS Staff Paper. EPA-452/R-07-003.
Washington, DC, U.S. EPA. Docket EPA-HQ-OAR-2010-0799.
\404\ National Research Council (NRC), 2008. Estimating
Mortality Risk Reduction and Economic Benefits from Controlling
Ozone Air Pollution. The National Academies Press: Washington, DC
Docket EPA-HQ-OAR-2010-0799.
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c. Nitrogen Oxides and Sulfur Oxides
i. Background
Nitrogen dioxide (NO2) is a member of the NOX
family of gases. Most NO2 is formed in the air through the
oxidation of nitric oxide (NO) emitted when fuel is burned at a high
temperature. Sulfur Dioxide (SO2) a member of the sulfur
oxide (SOX) family of gases, is formed from burning fuels
containing sulfur (e.g., coal or oil derived), extracting gasoline from
oil, or extracting metals from ore.
SO2 and NO2 can dissolve in water droplets
and further oxidize to form sulfuric and nitric acid which react with
ammonia to form sulfates and nitrates, both of which are important
components of ambient PM. The health effects of ambient PM are
discussed in Section III.G.3.a.ii of this preamble. NOX and
NMHC are the two major precursors of ozone. The health effects of ozone
are covered in Section III.G.3.b.ii.
ii. Health Effects of NO2
Information on the health effects of NO2 can be found in
the EPA Integrated Science Assessment (ISA) for Nitrogen Oxides.\405\
The EPA has concluded that the findings of epidemiologic, controlled
human exposure, and animal toxicological studies provide evidence that
is sufficient to infer a likely causal relationship between respiratory
effects and short-term NO2 exposure. The ISA concludes that
the strongest evidence for such a relationship comes from epidemiologic
studies of respiratory effects including symptoms, emergency department
visits, and hospital admissions. The ISA also draws two broad
conclusions regarding airway responsiveness following NO2
exposure. First, the ISA concludes that NO2 exposure may
enhance the sensitivity to allergen-induced decrements in lung function
and increase the allergen-induced airway inflammatory response
following 30-minute exposures of asthmatics to NO2
concentrations as low as 0.26 ppm. Second, exposure to NO2
has been found to enhance the inherent responsiveness of the airway to
subsequent nonspecific challenges in controlled human exposure studies
of asthmatic subjects. Small but significant increases in non-specific
airway hyperresponsiveness were reported following 1-hour exposures of
asthmatics to 0.1 ppm NO2. Enhanced airway responsiveness
could have important clinical implications for asthmatics since
transient increases in airway responsiveness following NO2
exposure have the potential to increase symptoms and worsen asthma
control. Together, the epidemiologic and experimental data sets form a
plausible, consistent, and coherent description of a relationship
between NO2 exposures and an array of adverse health effects
that range from the onset of respiratory symptoms to hospital
admission.
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\405\ U.S. EPA (2008). Integrated Science Assessment for Oxides
of Nitrogen--Health Criteria (Final Report). EPA/600/R-08/071.
Washington, DC: U.S. EPA. Docket EPA-HQ-OAR-2010-0799.
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Although the weight of evidence supporting a causal relationship is
somewhat less certain than that associated with respiratory morbidity,
NO2 has also been linked to other health endpoints. These
include all-cause (nonaccidental) mortality, hospital admissions or
emergency department visits for cardiovascular disease, and decrements
in lung function growth associated with chronic exposure.
iii. Health Effects of SO2
Information on the health effects of SO2 can be found in
the EPA Integrated Science Assessment for Sulfur Oxides.\406\
SO2 has long been known to cause adverse respiratory health
effects, particularly among individuals with asthma. Other potentially
sensitive groups include children and the elderly. During periods of
elevated ventilation, asthmatics may experience symptomatic
bronchoconstriction within minutes of exposure. Following an extensive
evaluation of health evidence from epidemiologic and laboratory
studies, the EPA has concluded that there is a causal relationship
between respiratory health effects and short-term exposure to
SO2. Separately, based on an evaluation of the epidemiologic
evidence of associations between short-term exposure to SO2
and mortality, the EPA has concluded that the overall evidence is
suggestive of a causal relationship between short-term exposure to
SO2 and mortality.
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\406\ U.S. EPA. (2008). Integrated Science Assessment (ISA) for
Sulfur Oxides--Health Criteria (Final Report). EPA/600/R-08/047F.
Washington, DC: U.S. Environmental Protection Agency. Docket EPA-HQ-
OAR-2010-0799.
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d. Carbon Monoxide
Information on the health effects of CO can be found in the EPA
Integrated Science Assessment (ISA) for Carbon Monoxide.\407\ The ISA
concludes that ambient concentrations of CO are associated with a
number of adverse health effects.\408\ This section provides a summary
of the health effects associated with exposure to ambient
concentrations of CO.\409\
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\407\ U.S. EPA, 2010. Integrated Science Assessment for Carbon
Monoxide (Final Report). U.S. Environmental Protection Agency,
Washington, DC, EPA/600/R-09/019F, 2010. Available at http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=218686. Docket EPA-HQ-
OAR-2010-0799.
\408\ The ISA evaluates the health evidence associated with
different health effects, assigning one of five ``weight of
evidence'' determinations: causal relationship, likely to be a
causal relationship, suggestive of a causal relationship, inadequate
to infer a causal relationship, and not likely to be a causal
relationship. For definitions of these levels of evidence, please
refer to Section 1.6 of the ISA.
\409\ Personal exposure includes contributions from many
sources, and in many different environments. Total personal exposure
to CO includes both ambient and nonambient components; and both
components may contribute to adverse health effects.
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Human clinical studies of subjects with coronary artery disease
show a decrease in the time to onset of exercise-induced angina (chest
pain) and electrocardiogram changes following CO exposure. In addition,
epidemiologic studies show associations between short-term CO exposure
and cardiovascular morbidity, particularly increased emergency room
visits and hospital admissions for coronary heart disease (including
ischemic heart disease, myocardial infarction, and angina). Some
epidemiologic evidence is also available for increased hospital
admissions and emergency room visits for congestive heart failure and
cardiovascular disease as a whole. The ISA concludes that a causal
relationship is likely to exist between short-term exposures to CO and
cardiovascular morbidity. It also concludes that available data are
inadequate to conclude that a causal relationship exists between long-
term exposures to CO and cardiovascular morbidity.
Animal studies show various neurological effects with in-utero CO
exposure. Controlled human exposure studies report inconsistent neural
and behavioral effects following low-level CO exposures. The ISA
concludes the evidence is suggestive of a causal relationship with both
short- and long-term exposure to CO and central nervous system effects.
A number of epidemiologic and animal toxicological studies cited in
the ISA have evaluated associations between CO exposure and birth
outcomes such as preterm birth or cardiac birth defects. The
epidemiologic studies provide limited evidence of a CO-induced effect
on preterm births and birth defects, with weak evidence for a decrease
in birth weight. Animal
[[Page 75106]]
toxicological studies have found associations between perinatal CO
exposure and decrements in birth weight, as well as other developmental
outcomes. The ISA concludes these studies are suggestive of a causal
relationship between long-term exposures to CO and developmental
effects and birth outcomes.
Epidemiologic studies provide evidence of effects on respiratory
morbidity such as changes in pulmonary function, respiratory symptoms,
and hospital admissions associated with ambient CO concentrations. A
limited number of epidemiologic studies considered copollutants such as
ozone, SO2, and PM in two-pollutant models and found that CO
risk estimates were generally robust, although this limited evidence
makes it difficult to disentangle effects attributed to CO itself from
those of the larger complex air pollution mixture. Controlled human
exposure studies have not extensively evaluated the effect of CO on
respiratory morbidity. Animal studies at levels of 50-100 ppm CO show
preliminary evidence of altered pulmonary vascular remodeling and
oxidative injury. The ISA concludes that the evidence is suggestive of
a causal relationship between short-term CO exposure and respiratory
morbidity, and inadequate to conclude that a causal relationship exists
between long-term exposure and respiratory morbidity.
Finally, the ISA concludes that the epidemiologic evidence is
suggestive of a causal relationship between short-term exposures to CO
and mortality. Epidemiologic studies provide evidence of an association
between short-term exposure to CO and mortality, but limited evidence
is available to evaluate cause-specific mortality outcomes associated
with CO exposure. In addition, the attenuation of CO risk estimates
which was often observed in copollutant models contributes to the
uncertainty as to whether CO is acting alone or as an indicator for
other combustion-related pollutants. The ISA also concludes that there
is not likely to be a causal relationship between relevant long-term
exposures to CO and mortality.
e. Air Toxics
Light-duty vehicle emissions contribute to ambient levels of air
toxics known or suspected as human or animal carcinogens, or that have
noncancer health effects. The population experiences an elevated risk
of cancer and other noncancer health effects from exposure to the class
of pollutants known collectively as ``air toxics.'' \410\ These
compounds include, but are not limited to, benzene, 1,3-butadiene,
formaldehyde, acetaldehyde, acrolein, polycyclic organic matter, and
naphthalene. These compounds were identified as national or regional
risk drivers or contributors in the 2005 National-Scale Air Toxics
Assessment and have significant inventory contributions from mobile
sources.\411\
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\410\ U.S. EPA. (2011) Summary of Results for the 2005 National-
Scale Assessment. http://www.epa.gov/ttn/atw/nata2005/05pdf/sum_results.pdf. Docket EPA-HQ-OAR-2010-0799.
\411\ U.S. EPA (2011) 2005 National-Scale Air Toxics Assessment.
http://www.epa.gov/ttn/atw/nata2005. Docket EPA-HQ-OAR-2010-0799.
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i. Benzene
The EPA's Integrated Risk Information System (IRIS) database lists
benzene as a known human carcinogen (causing leukemia) by all routes of
exposure, and concludes that exposure is associated with additional
health effects, including genetic changes in both humans and animals
and increased proliferation of bone marrow cells in
mice.412 413 414 EPA states in its IRIS database that data
indicate a causal relationship between benzene exposure and acute
lymphocytic leukemia and suggest a relationship between benzene
exposure and chronic non-lymphocytic leukemia and chronic lymphocytic
leukemia. The International Agency for Research on Carcinogens (IARC)
has determined that benzene is a human carcinogen and the U.S.
Department of Health and Human Services (DHHS) has characterized
benzene as a known human carcinogen.415 416
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\412\ U.S. EPA. 2000. Integrated Risk Information System File
for Benzene. This material is available electronically at http://www.epa.gov/iris/subst/0276.htm. Docket EPA-HQ-OAR-2010-0799.
\413\ International Agency for Research on Cancer. 1982.
Monographs on the evaluation of carcinogenic risk of chemicals to
humans, Volume 29. Some industrial chemicals and dyestuffs, World
Health Organization, Lyon, France, p. 345-389. Docket EPA-HQ-OAR-
2010-0799.
\414\ Irons, R.D.; Stillman, W.S.; Colagiovanni, D.B.; Henry,
V.A. 1992. Synergistic action of the benzene metabolite hydroquinone
on myelopoietic stimulating activity of granulocyte/macrophage
colony-stimulating factor in vitro, Proc. Natl. Acad. Sci. 89:3691-
3695. Docket EPA-HQ-OAR-2010-0799.
\415\ See IARC, Note 413, above.
\416\ U.S. Department of Health and Human Services National
Toxicology Program 11th Report on Carcinogens available at: http://ntp.niehs.nih.gov/go/16183. Docket EPA-HQ-OAR-2010-0799.
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A number of adverse noncancer health effects including blood
disorders, such as preleukemia and aplastic anemia, have also been
associated with long-term exposure to benzene.417 418 The
most sensitive noncancer effect observed in humans, based on current
data, is the depression of the absolute lymphocyte count in
blood.419 420 In addition, published work, including studies
sponsored by the Health Effects Institute (HEI), provides evidence that
biochemical responses are occurring at lower levels of benzene exposure
than previously known.421 422 423 424 EPA's IRIS program has
not yet evaluated these new data.
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\417\ Aksoy, M. (1989). Hematotoxicity and carcinogenicity of
benzene. Environ. Health Perspect. 82: 193-197. Docket EPA-HQ-OAR-
2010-0799.
\418\ Goldstein, B.D. (1988). Benzene toxicity. Occupational
medicine. State of the Art Reviews. 3: 541-554. Docket EPA-HQ-OAR-
2010-0799.
\419\ Rothman, N., G.L. Li, M. Dosemeci, W.E. Bechtold, G.E.
Marti, Y.Z. Wang, M. Linet, L.Q. Xi, W. Lu, M.T. Smith, N. Titenko-
Holland, L.P. Zhang, W. Blot, S.N. Yin, and R.B. Hayes (1996)
Hematotoxicity among Chinese workers heavily exposed to benzene. Am.
J. Ind. Med. 29: 236-246. Docket EPA-HQ-OAR-2010-0799.
\420\ U.S. EPA (2002) Toxicological Review of Benzene (Noncancer
Effects). Environmental Protection Agency, Integrated Risk
Information System, Research and Development, National Center for
Environmental Assessment, Washington DC. This material is available
electronically at http://www.epa.gov/iris/subst/0276.htm. Docket
EPA-HQ-OAR-2010-0799.
\421\ Qu, O.; Shore, R.; Li, G.; Jin, X.; Chen, C.L.; Cohen, B.;
Melikian, A.; Eastmond, D.; Rappaport, S.; Li, H.; Rupa, D.;
Suramaya, R.; Songnian, W.; Huifant, Y.; Meng, M.; Winnik, M.; Kwok,
E.; Li, Y.; Mu, R.; Xu, B.; Zhang, X.; Li, K. (2003) HEI Report 115,
Validation & Evaluation of Biomarkers in Workers Exposed to Benzene
in China. Docket EPA-HQ-OAR-2010-0799.
\422\ Qu, Q., R. Shore, G. Li, X. Jin, L.C. Chen, B. Cohen, et
al. (2002) Hematological changes among Chinese workers with a broad
range of benzene exposures. Am. J. Industr. Med. 42: 275-285. Docket
EPA-HQ-OAR-2010-0799.
\423\ Lan, Qing, Zhang, L., Li, G., Vermeulen, R., et al. (2004)
Hematotoxically in Workers Exposed to Low Levels of Benzene. Science
306: 1774-1776. Docket EPA-HQ-OAR-2010-0799.
\424\ Turtletaub, K.W. and Mani, C. (2003) Benzene metabolism in
rodents at doses relevant to human exposure from Urban Air. Research
Reports Health Effect Inst. Report No. 113. Docket EPA-HQ-OAR-2010-
0799.
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ii. 1,3-Butadiene
EPA has characterized 1,3-butadiene as carcinogenic to humans by
inhalation.425 426 The IARC has determined that 1,3-
butadiene is a human carcinogen and the U.S. DHHS has characterized
1,3-butadiene as a known human carcinogen.427 428 There
[[Page 75107]]
are numerous studies consistently demonstrating that 1,3-butadiene is
metabolized into genotoxic metabolites by experimental animals and
humans. The specific mechanisms of 1,3-butadiene-induced carcinogenesis
are unknown; however, the scientific evidence strongly suggests that
the carcinogenic effects are mediated by genotoxic metabolites. Animal
data suggest that females may be more sensitive than males for cancer
effects associated with 1,3-butadiene exposure; there are insufficient
data in humans from which to draw conclusions about sensitive
subpopulations. 1,3-butadiene also causes a variety of reproductive and
developmental effects in mice; no human data on these effects are
available. The most sensitive effect was ovarian atrophy observed in a
lifetime bioassay of female mice.429
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\425\ U.S. EPA (2002) Health Assessment of 1,3-Butadiene. Office
of Research and Development, National Center for Environmental
Assessment, Washington Office, Washington, DC. Report No. EPA600-P-
98-001F. This document is available electronically at http://www.epa.gov/iris/supdocs/buta-sup.pdf. Docket EPA-HQ-OAR-2010-0799.
\426\ U.S. EPA (2002) Full IRIS Summary for 1,3-butadiene (CASRN
106-99-0). Environmental Protection Agency, Integrated Risk
Information System (IRIS), Research and Development, National Center
for Environmental Assessment, Washington, DC http://www.epa.gov/iris/subst/0139.htm. Docket EPA-HQ-OAR-2010-0799.
\427\ International Agency for Research on Cancer (1999)
Monographs on the evaluation of carcinogenic risk of chemicals to
humans, Volume 71, Re-evaluation of some organic chemicals,
hydrazine and hydrogen peroxide and Volume 97 (in preparation),
World Health Organization, Lyon, France. Docket EPA-HQ-OAR-2010-
0799.
\428\ U.S. Department of Health and Human Services (2005)
National Toxicology Program 11th Report on Carcinogens available at:
ntp.niehs.nih.gov/index.cfm?objectid=32BA9724-F1F6-975E-7FCE50709CB4C932. Docket EPA-HQ-OAR-2010-0799.
\429\ Bevan, C.; Stadler, J.C.; Elliot, G.S.; et al. (1996)
Subchronic toxicity of 4-vinylcyclohexene in rats and mice by
inhalation. Fundam. Appl. Toxicol. 32:1-10. Docket EPA-HQ-OAR-2010-
0799.
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iii. Formaldehyde
Since 1987, EPA has classified formaldehyde as a probable human
carcinogen based on evidence in humans and in rats, mice, hamsters, and
monkeys.\430\ EPA is currently reviewing epidemiological data published
since that time. For instance, research conducted by the National
Cancer Institute found an increased risk of nasopharyngeal cancer and
lymphohematopoietic malignancies such as leukemia among workers exposed
to formaldehyde.431, 432 In an analysis of the
lymphohematopoietic cancer mortality from an extended follow-up of
these workers, the National Cancer Institute confirmed an association
between lymphohematopoietic cancer risk and peak exposures.\433\ A
National Institute of Occupational Safety and Health study of garment
workers also found increased risk of death due to leukemia among
workers exposed to formaldehyde.\434\ Extended follow-up of a cohort of
British chemical workers did not find evidence of an increase in
nasopharyngeal or lymphohematopoietic cancers, but a continuing
statistically significant excess in lung cancers was reported.\435\ In
2006, the IARC re-classified formaldehyde as a human carcinogen (Group
1).\436\
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\430\ U.S. EPA (1987) Assessment of Health Risks to Garment
Workers and Certain Home Residents from Exposure to Formaldehyde,
Office of Pesticides and Toxic Substances, April 1987. Docket EPA-
HQ-OAR-2010-0799.
\431\ Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Hayes, R.
B.; Blair, A. 2003. Mortality from lymphohematopoetic malignancies
among workers in formaldehyde industries. Journal of the National
Cancer Institute 95: 1615-1623. Docket EPA-HQ-OAR-2010-0799.
\432\ Hauptmann, M..; Lubin, J. H.; Stewart, P. A.; Hayes, R.
B.; Blair, A. 2004. Mortality from solid cancers among workers in
formaldehyde industries. American Journal of Epidemiology 159: 1117-
1130. Docket EPA-HQ-OAR-2010-0799.
\433\ Beane Freeman, L. E.; Blair, A.; Lubin, J. H.; Stewart, P.
A.; Hayes, R. B.; Hoover, R. N.; Hauptmann, M. 2009. Mortality from
lymphohematopoietic malignancies among workers in formaldehyde
industries: The National Cancer Institute cohort. J. National Cancer
Inst. 101: 751-761. Docket EPA-HQ-OAR-2010-0799.
\434\ Pinkerton, L. E. 2004. Mortality among a cohort of garment
workers exposed to formaldehyde: an update. Occup. Environ. Med. 61:
193-200. Docket EPA-HQ-OAR-2010-0799.
\435\ Coggon, D, EC Harris, J Poole, KT Palmer. 2003. Extended
follow-up of a cohort of British chemical workers exposed to
formaldehyde. J National Cancer Inst. 95:1608-1615. Docket EPA-HQ-
OAR-2010-0799.
\436\ International Agency for Research on Cancer. 2006.
Formaldehyde, 2-Butoxyethanol and 1-tert-Butoxypropan-2-ol. Volume
88. (in preparation), World Health Organization, Lyon, France.
Docket EPA-HQ-OAR-2010-0799;
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Formaldehyde exposure also causes a range of noncancer health
effects, including irritation of the eyes (burning and watering of the
eyes), nose and throat. Effects from repeated exposure in humans
include respiratory tract irritation, chronic bronchitis and nasal
epithelial lesions such as metaplasia and loss of cilia. Animal studies
suggest that formaldehyde may also cause airway inflammation--including
eosinophil infiltration into the airways. There are several studies
that suggest that formaldehyde may increase the risk of asthma--
particularly in the young.437 438
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\437\ Agency for Toxic Substances and Disease Registry (ATSDR).
1999. Toxicological profile for Formaldehyde. Atlanta, GA: U.S.
Department of Health and Human Services, Public Health Service.
http://www.atsdr.cdc.gov/toxprofiles/tp111.html Docket EPA-HQ-OAR-
2010-0799.
\438\ WHO (2002) Concise International Chemical Assessment
Document 40: Formaldehyde. Published under the joint sponsorship of
the United Nations Environment Programme, the International Labour
Organization, and the World Health Organization, and produced within
the framework of the Inter-Organization Programme for the Sound
Management of Chemicals. Geneva. Docket EPA-HQ-OAR-2010-0799.
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iv. Acetaldehyde
Acetaldehyde is classified in EPA's IRIS database as a probable
human carcinogen, based on nasal tumors in rats, and is considered
toxic by the inhalation, oral, and intravenous routes.\439\
Acetaldehyde is reasonably anticipated to be a human carcinogen by the
U.S. DHHS in the 11th Report on Carcinogens and is classified as
possibly carcinogenic to humans (Group 2B) by the
IARC.440 441 EPA is currently conducting a reassessment of
cancer risk from inhalation exposure to acetaldehyde.
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\439\ U.S. EPA. 1991. Integrated Risk Information System File of
Acetaldehyde. Research and Development, National Center for
Environmental Assessment, Washington, DC. Available at http://www.epa.gov/iris/subst/0290.htm. Docket EPA-HQ-OAR-2010-0799.
\440\ U.S. Department of Health and Human Services National
Toxicology Program 11th Report on Carcinogens available at: http://ntp.niehs.nih.gov/index.cfm?objectid=32BA9724-F1F6-975E-7FCE50709CB4C932. Docket EPA-HQ-OAR-2010-0799.
\441\ International Agency for Research on Cancer. 1999. Re-
evaluation of some organic chemicals, hydrazine, and hydrogen
peroxide. IARC Monographs on the Evaluation of Carcinogenic Risk of
Chemical to Humans, Vol 71. Lyon, France. Docket EPA-HQ-OAR-2010-
0799.
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The primary noncancer effects of exposure to acetaldehyde vapors
include irritation of the eyes, skin, and respiratory tract.\442\ In
short-term (4 week) rat studies, degeneration of olfactory epithelium
was observed at various concentration levels of acetaldehyde
exposure.443 444 Data from these studies were used by EPA to
develop an inhalation reference concentration. Some asthmatics have
been shown to be a sensitive subpopulation to decrements in functional
expiratory volume (FEV1 test) and bronchoconstriction upon acetaldehyde
inhalation.\445\ The agency is currently conducting a reassessment of
the health hazards from inhalation exposure to acetaldehyde.
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\442\ See Integrated Risk Information System File of
Acetaldehyde, Note 439, above.
\443\ Appleman, L. M., R. A. Woutersen, V. J. Feron, R. N.
Hooftman, and W. R. F. Notten. 1986. Effects of the variable versus
fixed exposure levels on the toxicity of acetaldehyde in rats. J.
Appl. Toxicol. 6: 331-336. Docket EPA-HQ-OAR-2010-0799.
\444\ Appleman, L.M., R.A. Woutersen, and V.J. Feron. 1982.
Inhalation toxicity of acetaldehyde in rats. I. Acute and subacute
studies. Toxicology. 23: 293-297. Docket EPA-HQ-OAR-2010-0799.
\445\ Myou, S.; Fujimura, M.; Nishi K.; Ohka, T.; and Matsuda,
T. 1993. Aerosolized acetaldehyde induces histamine-mediated
bronchoconstriction in asthmatics. Am. Rev. Respir.Dis.148(4 Pt 1):
940-3. Docket EPA-HQ-OAR-2010-0799.
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v. Acrolein
Acrolein is extremely acrid and irritating to humans when inhaled,
with acute exposure resulting in upper respiratory tract irritation,
mucus hypersecretion and congestion. The intense irritancy of this
carbonyl has been demonstrated during controlled tests in human
subjects, who suffer intolerable eye and nasal mucosal
[[Page 75108]]
sensory reactions within minutes of exposure.\446\ These data and
additional studies regarding acute effects of human exposure to
acrolein are summarized in EPA's 2003 IRIS Human Health Assessment for
acrolein.\447\ Evidence available from studies in humans indicate that
levels as low as 0.09 ppm (0.21 mg/m\3\) for five minutes may elicit
subjective complaints of eye irritation with increasing concentrations
leading to more extensive eye, nose and respiratory symptoms.\448\
Lesions to the lungs and upper respiratory tract of rats, rabbits, and
hamsters have been observed after subchronic exposure to acrolein.\449\
Acute exposure effects in animal studies report bronchial hyper-
responsiveness.\450\ In one study, the acute respiratory irritant
effects of exposure to 1.1 ppm acrolein were more pronounced in mice
with allergic airway disease by comparison to non-diseased mice which
also showed decreases in respiratory rate.\451\ Based on these animal
data and demonstration of similar effects in humans (e.g., reduction in
respiratory rate), individuals with compromised respiratory function
(e.g., emphysema, asthma) are expected to be at increased risk of
developing adverse responses to strong respiratory irritants such as
acrolein.
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\446\ U.S. EPA (U.S. Environmental Protection Agency). (2003)
Toxicological review of acrolein in support of summary information
on Integrated Risk Information System (IRIS) National Center for
Environmental Assessment, Washington, DC. EPA/635/R-03/003. p. 10.
Available online at: http://www.epa.gov/ncea/iris/toxreviews/0364tr.pdf. Docket EPA-HQ-OAR-2010-0799.
\447\ See U.S. EPA 2003 Toxicological review of acrolein, Note
446, above.
\448\ See U.S. EPA 2003 Toxicological review of acrolein, Note
446, at p. 11.
\449\ Integrated Risk Information System File of Acrolein.
Office of Research and Development, National Center for
Environmental Assessment, Washington, DC. This material is available
at http://www.epa.gov/iris/subst/0364.htm Docket EPA-HQ-OAR-2010-
0799.
\450\ See U.S. 2003 Toxicological review of acrolein, Note 446,
at p. 15.
\451\ Morris JB, Symanowicz PT, Olsen JE, et al. 2003. Immediate
sensory nerve-mediated respiratory responses to irritants in healthy
and allergic airway-diseased mice. J Appl Physiol 94(4):1563-1571.
Docket EPA-HQ-OAR-2010-0799.
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EPA determined in 2003 that the human carcinogenic potential of
acrolein could not be determined because the available data were
inadequate. No information was available on the carcinogenic effects of
acrolein in humans and the animal data provided inadequate evidence of
carcinogenicity.\452\ The IARC determined in 1995 that acrolein was not
classifiable as to its carcinogenicity in humans.\453\
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\452\ U.S. EPA. 2003. Integrated Risk Information System File of
Acrolein. Research and Development, National Center for
Environmental Assessment, Washington, DC. This material is available
at http://www.epa.gov/iris/subst/0364.htm Docket EPA-HQ-OAR-2010-
0799.
\453\ International Agency for Research on Cancer. 1995.
Monographs on the evaluation of carcinogenic risk of chemicals to
humans, Volume 63. Dry cleaning, some chlorinated solvents and other
industrial chemicals, World Health Organization, Lyon, France.
Docket EPA-HQ-OAR-2010-0799.
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vi. Polycyclic Organic Matter
The term polycyclic organic matter (POM) defines a broad class of
compounds that includes the polycyclic aromatic hydrocarbon compounds
(PAHs). One of these compounds, naphthalene, is discussed separately
below. POM compounds are formed primarily from combustion and are
present in the atmosphere in gas and particulate form. Cancer is the
major concern from exposure to POM. Epidemiologic studies have reported
an increase in lung cancer in humans exposed to diesel exhaust, coke
oven emissions, roofing tar emissions, and cigarette smoke; all of
these mixtures contain POM compounds.454 455 Animal studies
have reported respiratory tract tumors from inhalation exposure to
benzo[a]pyrene and alimentary tract and liver tumors from oral exposure
to benzo[a]pyrene. In 1997 EPA classified seven PAHs (benzo[a]pyrene,
benz[a]anthracene, chrysene, benzo[b]fluoranthene,
benzo[k]fluoranthene, dibenz[a,h]anthracene, and indeno[1,2,3-
cd]pyrene) as Group B2, probable human carcinogens.\456\ Since that
time, studies have found that maternal exposures to PAHs in a
population of pregnant women were associated with several adverse birth
outcomes, including low birth weight and reduced length at birth, as
well as impaired cognitive development in preschool children (3 years
of age).457 458 EPA has not yet evaluated these studies.
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\454\ Agency for Toxic Substances and Disease Registry (ATSDR).
1995. Toxicological profile for Polycyclic Aromatic Hydrocarbons
(PAHs). Atlanta, GA: U.S. Department of Health and Human Services,
Public Health Service. Available electronically at http://www.atsdr.cdc.gov/ToxProfiles/TP.asp?id=122&tid=25.
455 U.S. EPA (2002). Health Assessment Document for
Diesel Engine Exhaust. EPA/600/8-90/057F Office of Research and
Development, Washington, DC. http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=29060. Docket EPA-HQ-OAR-2010-0799
\456\ U.S. EPA (1997). Integrated Risk Information System File
of indeno(1,2,3-cd)pyrene. Research and Development, National Center
for Environmental Assessment, Washington, DC. This material is
available electronically at http://www.epa.gov/ncea/iris/subst/0457.htm.
\457\ Perera, F.P.; Rauh, V.; Tsai, W-Y.; et al. (2002) Effect
of transplacental exposure to environmental pollutants on birth
outcomes in a multiethnic population. Environ Health Perspect. 111:
201-205.
458 Perera, F.P.; Rauh, V.; Whyatt, R.M.; Tsai, W.Y.;
Tang, D.; Diaz, D.; Hoepner, L.; Barr, D.; Tu, Y.H.; Camann, D.;
Kinney, P. (2006) Effect of prenatal exposure to airborne polycyclic
aromatic hydrocarbons on neurodevelopment in the first 3 years of
life among inner-city children. Environ Health Perspect 114: 1287-
1292.
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vii. Naphthalene
Naphthalene is found in small quantities in gasoline and diesel
fuels. Naphthalene emissions have been measured in larger quantities in
both gasoline and diesel exhaust compared with evaporative emissions
from mobile sources, indicating it is primarily a product of
combustion. EPA released an external review draft of a reassessment of
the inhalation carcinogenicity of naphthalene based on a number of
recent animal carcinogenicity studies.\459\ The draft reassessment
completed external peer review.\460\ Based on external peer review
comments received, additional analyses are being undertaken. This
external review draft does not represent official agency opinion and
was released solely for the purposes of external peer review and public
comment. The National Toxicology Program listed naphthalene as
``reasonably anticipated to be a human carcinogen'' in 2004 on the
basis of bioassays reporting clear evidence of carcinogenicity in rats
and some evidence of carcinogenicity in mice.\461\ California EPA has
released a new risk assessment for naphthalene, and the IARC has
reevaluated naphthalene and re-classified it as Group 2B: possibly
carcinogenic to humans.\462\ Naphthalene also causes a number of
chronic non-cancer effects in animals, including abnormal cell changes
and growth in respiratory and nasal tissues.\463\
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\459\ U.S. EPA. 2004. Toxicological Review of Naphthalene
(Reassessment of the Inhalation Cancer Risk), Environmental
Protection Agency, Integrated Risk Information System, Research and
Development, National Center for Environmental Assessment,
Washington, DC. This material is available electronically at http://www.epa.gov/iris/subst/0436.htm. Docket EPA-HQ-OAR-2010-0799.
\460\ Oak Ridge Institute for Science and Education. (2004).
External Peer Review for the IRIS Reassessment of the Inhalation
Carcinogenicity of Naphthalene. August 2004. http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=84403 Docket EPA-HQ-OAR-2010-0799.
\461\ National Toxicology Program (NTP). (2004). 11th Report on
Carcinogens. Public Health Service, U.S. Department of Health and
Human Services, Research Triangle Park, NC. Available from: http://ntp-server.niehs.nih.gov. Docket EPA-HQ-OAR-2010-0799.
\462\ International Agency for Research on Cancer. (2002).
Monographs on the Evaluation of the Carcinogenic Risk of Chemicals
for Humans. Vol. 82. Lyon, France. Docket EPA-HQ-OAR-2010-0799.
\463\ U. S. EPA. 1998. Toxicological Review of Naphthalene,
Environmental Protection Agency, Integrated Risk Information System,
Research and Development, National Center for Environmental
Assessment, Washington, DC. This material is available
electronically at http://www.epa.gov/iris/subst/0436.htm Docket EPA-
HQ-OAR-2010-0799.
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[[Page 75109]]
viii. Other Air Toxics
In addition to the compounds described above, other compounds in
gaseous hydrocarbon and PM emissions from light-duty vehicles will be
affected by this proposal. Mobile source air toxic compounds that would
potentially be impacted include ethylbenzene, propionaldehyde, toluene,
and xylene. Information regarding the health effects of these compounds
can be found in EPA's IRIS database.\464\
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\464\ U.S. EPA Integrated Risk Information System (IRIS)
database is available at: http://www.epa.gov/iris.
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f. Exposure and Health Effects Associated With Traffic-Related Air
Pollution
Populations who live, work, or attend school near major roads
experience elevated exposure to a wide range of air pollutants, as well
as higher risks for a number of adverse health effects. While the
previous sections of this preamble have focused on the health effects
associated with individual criteria pollutants or air toxics, this
section discusses the mixture of different exposures near major
roadways, rather than the effects of any single pollutant. As such,
this section emphasizes traffic-related air pollution, in general, as
the relevant indicator of exposure rather than any particular
pollutant.
Concentrations of many traffic-generated air pollutants are
elevated for up to 300-500 meters downwind of roads with high traffic
volumes.\465\ Numerous sources on roads contribute to elevated roadside
concentrations, including exhaust and evaporative emissions, and
resuspension of road dust and tire and brake wear. Concentrations of
several criteria and hazardous air pollutants are elevated near major
roads. Furthermore, different semi-volatile organic compounds and
chemical components of particulate matter, including elemental carbon,
organic material, and trace metals, have been reported at higher
concentrations near major roads.
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\465\ Zhou, Y.; Levy, J.I. (2007) Factors influencing the
spatial extent of mobile source air pollution impacts: a meta-
analysis. BMC Public Health 7: 89. doi:10.1186/1471-2458-7-89 Docket
EPA-HQ-OAR-2010-0799.
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Populations near major roads experience greater risk of certain
adverse health effects. The Health Effects Institute published a report
on the health effects of traffic-related air pollution.\466\ It
concluded that evidence is ``sufficient to infer the presence of a
causal association'' between traffic exposure and exacerbation of
childhood asthma symptoms. The HEI report also concludes that the
evidence is either ``sufficient'' or ``suggestive but not sufficient''
for a causal association between traffic exposure and new childhood
asthma cases. A review of asthma studies by Salam et al. (2008) reaches
similar conclusions.\467\ The HEI report also concludes that there is
``suggestive'' evidence for pulmonary function deficits associated with
traffic exposure, but concluded that there is ``inadequate and
insufficient'' evidence for causal associations with respiratory health
care utilization, adult-onset asthma, chronic obstructive pulmonary
disease symptoms, and allergy. A review by Holguin (2008) notes that
the effects of traffic on asthma may be modified by nutrition status,
medication use, and genetic factors.\468\
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\466\ HEI Panel on the Health Effects of Air Pollution. (2010)
Traffic-related air pollution: a critical review of the literature
on emissions, exposure, and health effects. [Online at http://www.healtheffects.org] Docket EPA-HQ-OAR-2010-0799.
\467\ Salam, M.T.; Islam, T.; Gilliland, F.D. (2008) Recent
evidence for adverse effects of residential proximity to traffic
sources on asthma. Current Opin Pulm Med 14: 3-8. Docket EPA-HQ-OAR-
2010-0799.
\468\ Holguin, F. (2008) Traffic, outdoor air pollution, and
asthma. Immunol Allergy Clinics North Am 28: 577-588. Docket EPA-HQ-
OAR-2010-0799.
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The HEI report also concludes that evidence is ``suggestive'' of a
causal association between traffic exposure and all-cause and
cardiovascular mortality. There is also evidence of an association
between traffic-related air pollutants and cardiovascular effects such
as changes in heart rhythm, heart attack, and cardiovascular disease.
The HEI report characterizes this evidence as ``suggestive'' of a
causal association, and an independent epidemiological literature
review by Adar and Kaufman (2007) concludes that there is ``consistent
evidence'' linking traffic-related pollution and adverse cardiovascular
health outcomes.\469\
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\469\ Adar, S.D.; Kaufman, J.D. (2007) Cardiovascular disease
and air pollutants: evaluating and improving epidemiological data
implicating traffic exposure. Inhal Toxicol 19: 135-149. Docket EPA-
HQ-OAR-2010-0799.
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Some studies have reported associations between traffic exposure
and other health effects, such as birth outcomes (e.g., low birth
weight) and childhood cancer. The HEI report concludes that there is
currently ``inadequate and insufficient'' evidence for a causal
association between these effects and traffic exposure. A review by
Raaschou-Nielsen and Reynolds (2006) concluded that evidence of an
association between childhood cancer and traffic-related air pollutants
is weak, but noted the inability to draw firm conclusions based on
limited evidence.\470\
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\470\ Raaschou-Nielsen, O.; Reynolds, P. (2006) Air pollution
and childhood cancer: a review of the epidemiological literature.
Int J Cancer 118: 2920-2929. Docket EPA-HQ-OAR-2010-0799.
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There is a large population in the United States living in close
proximity of major roads. According to the Census Bureau's American
Housing Survey for 2007, approximately 20 million residences in the
United States, 15.6% of all homes, are located within 300 feet (91 m)
of a highway with 4+ lanes, a railroad, or an airport.\471\ Therefore,
at current population of approximately 309 million, assuming that
population and housing are similarly distributed, there are over 48
million people in the United States living near such sources. The HEI
report also notes that in two North American cities, Los Angeles and
Toronto, over 40% of each city's population live within 500 meters of a
highway or 100 meters of a major road. It also notes that about 33% of
each city's population resides within 50 meters of major roads.
Together, the evidence suggests that a large U.S. population lives in
areas with elevated traffic-related air pollution.
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\471\ U.S. Census Bureau (2008) American Housing Survey for the
United States in 2007. Series H-150 (National Data), Table 1A-7.
[Accessed at http://www.census.gov/hhes/www/housing/ahs/ahs07/ahs07.html on January 22, 2009] Docket EPA-HQ-OAR-2010-0799.
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People living near roads are often socioeconomically disadvantaged.
According to the 2007 American Housing Survey, a renter-occupied
property is over twice as likely as an owner-occupied property to be
located near a highway with 4+ lanes, railroad or airport. In the same
survey, the median household income of rental housing occupants was
less than half that of owner-occupants ($28,921/$59,886). Numerous
studies in individual urban areas report higher levels of traffic-
related air pollutants in areas with high minority or poor
populations.472 473 474
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\472\ Lena, T.S.; Ochieng, V.; Carter, M.; Holgu[iacute]n-Veras,
J.; Kinney, Public Law (2002) Elemental carbon and PM\2.5\ levels in
an urban community heavily impacted by truck traffic. Environ Health
Perspect 110: 1009-1015. Docket EPA-HQ-OAR-2010-0799.
473 Wier, M.; Sciammas, C.; Seto, E.; Bhatia, R.;
Rivard, T. (2009) Health, traffic, and environmental justice:
collaborative research and community action in San Francisco,
California. Am J Public Health 99: S499-S504. Docket EPA-HQ-OAR-
2010-0799.
474 Forkenbrock, D.J. and L.A. Schweitzer,
Environmental Justice and Transportation Investment Policy. Iowa
City: University of Iowa, 1997. Docket EPA-HQ-OAR-2010-0799.
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Students may also be exposed in situations where schools are
located
[[Page 75110]]
near major roads. In a study of nine metropolitan areas across the
United States, Appatova et al. (2008) found that on average greater
than 33% of schools were located within 400 m of an Interstate, U.S.,
or state highway, while 12% were located within 100 m.\475\ The study
also found that among the metropolitan areas studied, schools in the
Eastern United States were more often sited near major roadways than
schools in the Western United States.
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\475\ Appatova, A.S.; Ryan, P.H.; LeMasters, G.K.; Grinshpun,
S.A. (2008) Proximal exposure of public schools and students to
major roadways: a nationwide U.S. survey. J Environ Plan Mgmt Docket
EPA-HQ-OAR-2010-0799.
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Demographic studies of students in schools near major roadways
suggest that this population is more likely than the general student
population to be of non-white race or Hispanic ethnicity, and more
often live in low socioeconomic status
locations.476, 477, 478 There is some inconsistency in the
evidence, which may be due to different local development patterns and
measures of traffic and geographic scale used in the studies.
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\476\ Green, R.S.; Smorodinsky, S.; Kim, J.J.; McLaughlin, R.;
Ostro, B. (2004) Proximity of California public schools to busy
roads. Environ Health Perspect 112: 61-66. Docket EPA-HQ-OAR-2010-
0799.
477 Houston, D.; Ong, P.; Wu, J.; Winer, A. (2006)
Proximity of licensed child care facilities to near-roadway vehicle
pollution. Am J Public Health 96: 1611-1617. Docket EPA-HQ-OAR-2010-
0799.
478 Wu, Y.; Batterman, S. (2006) Proximity of schools
in Detroit, Michigan to automobile and truck traffic. J Exposure Sci
Environ Epidemiol 16: 457-470. Docket EPA-HQ-OAR-2010-0799.
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3. Environmental Effects of Non-GHG Pollutants
In this section we discuss some of the environmental effects of PM
and its precursors such as visibility impairment, atmospheric
deposition, and materials damage and soiling, as well as environmental
effects associated with the presence of ozone in the ambient air, such
as impacts on plants, including trees, agronomic crops and urban
ornamentals, and environmental effects associated with air toxics.
a. Visibility
Visibility can be defined as the degree to which the atmosphere is
transparent to visible light.\479\ Visibility impairment is caused by
light scattering and absorption by suspended particles and gases.
Visibility is important because it has direct significance to people's
enjoyment of daily activities in all parts of the country. Individuals
value good visibility for the well-being it provides them directly,
where they live and work, and in places where they enjoy recreational
opportunities. Visibility is also highly valued in significant natural
areas, such as national parks and wilderness areas, and special
emphasis is given to protecting visibility in these areas. For more
information on visibility see the final 2009 p.m. ISA.\480\
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\479\ National Research Council, 1993. Protecting Visibility in
National Parks and Wilderness Areas. National Academy of Sciences
Committee on Haze in National Parks and Wilderness Areas. National
Academy Press, Washington, DC. Docket EPA-HQ-OAR-2010-0799. This
book can be viewed on the National Academy Press Web site at http://www.nap.edu/books/0309048443/html/.
\480\ See U.S. EPA 2009 Final PM ISA, Note 396.
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EPA is pursuing a two-part strategy to address visibility
impairment. First, EPA developed the regional haze program (64 FR
35714) which was put in place in July 1999 to protect the visibility in
Mandatory Class I Federal areas. There are 156 national parks, forests
and wilderness areas categorized as Mandatory Class I Federal areas (62
FR 38680-38681, July 18, 1997). These areas are defined in CAA section
162 as those national parks exceeding 6,000 acres, wilderness areas and
memorial parks exceeding 5,000 acres, and all international parks which
were in existence on August 7, 1977. Second, EPA has concluded that
PM2.5 causes adverse effects on visibility in other areas
that are not protected by the Regional Haze Rule, depending on
PM2.5 concentrations and other factors that control their
visibility impact effectiveness such as dry chemical composition and
relative humidity (i.e., an indicator of the water composition of the
particles), and has set secondary PM2.5 standards to address
these areas. The existing annual primary and secondary PM2.5
standards have been remanded and are being addressed in the currently
ongoing PM NAAQS review.
b. Plant and Ecosystem Effects of Ozone
Elevated ozone levels contribute to environmental effects, with
impacts to plants and ecosystems being of most concern. Ozone can
produce both acute and chronic injury in sensitive species depending on
the concentration level and the duration of the exposure. Ozone effects
also tend to accumulate over the growing season of the plant, so that
even low concentrations experienced for a longer duration have the
potential to create chronic stress on vegetation. Ozone damage to
plants includes visible injury to leaves and impaired photosynthesis,
both of which can lead to reduced plant growth and reproduction,
resulting in reduced crop yields, forestry production, and use of
sensitive ornamentals in landscaping. In addition, the impairment of
photosynthesis, the process by which the plant makes carbohydrates (its
source of energy and food), can lead to a subsequent reduction in root
growth and carbohydrate storage below ground, resulting in other, more
subtle plant and ecosystems impacts.
These latter impacts include increased susceptibility of plants to
insect attack, disease, harsh weather, interspecies competition and
overall decreased plant vigor. The adverse effects of ozone on forest
and other natural vegetation can potentially lead to species shifts and
loss from the affected ecosystems, resulting in a loss or reduction in
associated ecosystem goods and services. Lastly, visible ozone injury
to leaves can result in a loss of aesthetic value in areas of special
scenic significance like national parks and wilderness areas. The final
2006 Ozone Air Quality Criteria Document presents more detailed
information on ozone effects on vegetation and ecosystems.
c. Atmospheric Deposition
Wet and dry deposition of ambient particulate matter delivers a
complex mixture of metals (e.g., mercury, zinc, lead, nickel, aluminum,
cadmium), organic compounds (e.g., polycyclic organic matter, dioxins,
furans) and inorganic compounds (e.g., nitrate, sulfate) to terrestrial
and aquatic ecosystems. The chemical form of the compounds deposited
depends on a variety of factors including ambient conditions (e.g.,
temperature, humidity, oxidant levels) and the sources of the material.
Chemical and physical transformations of the compounds occur in the
atmosphere as well as the media onto which they deposit. These
transformations in turn influence the fate, bioavailability and
potential toxicity of these compounds. Atmospheric deposition has been
identified as a key component of the environmental and human health
hazard posed by several pollutants including mercury, dioxin and
PCBs.\481\
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\481\ U.S. EPA (2000) Deposition of Air Pollutants to the Great
Waters: Third Report to Congress. Office of Air Quality Planning and
Standards. EPA-453/R-00-0005. Docket EPA-HQ-OAR-2010-0799.
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Adverse impacts on water quality can occur when atmospheric
contaminants deposit to the water surface or when material deposited on
the land enters a waterbody through runoff. Potential impacts of
atmospheric deposition to waterbodies include those related to both
nutrient and toxic inputs. Adverse effects to human health and welfare
can occur from the addition of excess nitrogen via atmospheric
deposition. The nitrogen-nutrient enrichment
[[Page 75111]]
contributes to toxic algae blooms and zones of depleted oxygen, which
can lead to fish kills, frequently in coastal waters. Deposition of
heavy metals or other toxics may lead to the human ingestion of
contaminated fish, impairment of drinking water, damage to freshwater
and marine ecosystem components, and limits to recreational uses.
Several studies have been conducted in U.S. coastal waters and in the
Great Lakes Region in which the role of ambient PM deposition and
runoff is investigated.482, 483, 484, 485, 486
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\482\ U.S. EPA (2004) National Coastal Condition Report II.
Office of Research and Development/Office of Water. EPA-620/R-03/
002. Docket EPA-HQ-OAR-2010-0799.
483 Gao, Y., E.D. Nelson, M.P. Field, et al. 2002.
Characterization of atmospheric trace elements on PM2.5 particulate
matter over the New York-New Jersey harbor estuary. Atmos. Environ.
36: 1077-1086. Docket EPA-HQ-OAR-2010-0799.
484 Kim, G., N. Hussain, J.R. Scudlark, and T.M.
Church. 2000. Factors influencing the atmospheric depositional
fluxes of stable Pb, 210Pb, and 7Be into Chesapeake Bay. J. Atmos.
Chem. 36: 65-79. Docket EPA-HQ-OAR-2010-0799.
485 Lu, R., R.P. Turco, K. Stolzenbach, et al. 2003.
Dry deposition of airborne trace metals on the Los Angeles Basin and
adjacent coastal waters. J. Geophys. Res. 108(D2, 4074): AAC 11-1 to
11-24. Docket EPA-HQ-OAR-2010-0799.
486 Marvin, C.H., M.N. Charlton, E.J. Reiner, et al.
2002. Surficial sediment contamination in Lakes Erie and Ontario: A
comparative analysis. J. Great Lakes Res. 28(3): 437-450. Docket
EPA-HQ-OAR-2010-0799.
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Atmospheric deposition of nitrogen and sulfur contributes to
acidification, altering biogeochemistry and affecting animal and plant
life in terrestrial and aquatic ecosystems across the United States.
The sensitivity of terrestrial and aquatic ecosystems to acidification
from nitrogen and sulfur deposition is predominantly governed by
geology. Prolonged exposure to excess nitrogen and sulfur deposition in
sensitive areas acidifies lakes, rivers and soils. Increased acidity in
surface waters creates inhospitable conditions for biota and affects
the abundance and nutritional value of preferred prey species,
threatening biodiversity and ecosystem function. Over time, acidifying
deposition also removes essential nutrients from forest soils,
depleting the capacity of soils to neutralize future acid loadings and
negatively affecting forest sustainability. Major effects include a
decline in sensitive forest tree species, such as red spruce (Picea
rubens) and sugar maple (Acer saccharum), and a loss of biodiversity of
fishes, zooplankton, and macro invertebrates.
In addition to the role nitrogen deposition plays in acidification,
nitrogen deposition also leads to nutrient enrichment and altered
biogeochemical cycling. In aquatic systems increased nitrogen can alter
species assemblages and cause eutrophication. In terrestrial systems
nitrogen loading can lead to loss of nitrogen sensitive lichen species,
decreased biodiversity of grasslands, meadows and other sensitive
habitats, and increased potential for invasive species. For a broader
explanation of the topics treated here, refer to the description in
Section 6.1.2.2 of the RIA.
Adverse impacts on soil chemistry and plant life have been observed
for areas heavily influenced by atmospheric deposition of nutrients,
metals and acid species, resulting in species shifts, loss of
biodiversity, forest decline, damage to forest productivity and
reductions in ecosystem services. Potential impacts also include
adverse effects to human health through ingestion of contaminated
vegetation or livestock (as in the case for dioxin deposition),
reduction in crop yield, and limited use of land due to contamination.
Atmospheric deposition of pollutants can reduce the aesthetic
appeal of buildings and culturally important articles through soiling,
and can contribute directly (or in conjunction with other pollutants)
to structural damage by means of corrosion or erosion. Atmospheric
deposition may affect materials principally by promoting and
accelerating the corrosion of metals, by degrading paints, and by
deteriorating building materials such as concrete and limestone.
Particles contribute to these effects because of their electrolytic,
hygroscopic, and acidic properties, and their ability to adsorb
corrosive gases (principally sulfur dioxide).
d. Environmental Effects of Air Toxics
Emissions from producing, transporting and combusting fuel
contribute to ambient levels of pollutants that contribute to adverse
effects on vegetation. Volatile organic compounds, some of which are
considered air toxics, have long been suspected to play a role in
vegetation damage.\487\ In laboratory experiments, a wide range of
tolerance to VOCs has been observed.\488\ Decreases in harvested seed
pod weight have been reported for the more sensitive plants, and some
studies have reported effects on seed germination, flowering and fruit
ripening. Effects of individual VOCs or their role in conjunction with
other stressors (e.g., acidification, drought, temperature extremes)
have not been well studied. In a recent study of a mixture of VOCs
including ethanol and toluene on herbaceous plants, significant effects
on seed production, leaf water content and photosynthetic efficiency
were reported for some plant species.\489\
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\487\ U.S. EPA. 1991. Effects of organic chemicals in the
atmosphere on terrestrial plants. EPA/600/3-91/001. Docket EPA-HQ-
OAR-2010-0799.
\488\ Cape JN, ID Leith, J Binnie, J Content, M Donkin, M
Skewes, DN Price AR Brown, AD Sharpe. 2003. Effects of VOCs on
herbaceous plants in an open-top chamber experiment. Environ.
Pollut. 124:341-343. Docket EPA-HQ-OAR-2010-0799.
\489\ Cape JN, ID Leith, J Binnie, J Content, M Donkin, M
Skewes, DN Price AR Brown, AD Sharpe. 2003. Effects of VOCs on
herbaceous plants in an open-top chamber experiment. Environ.
Pollut. 124:341-343. Docket EPA-HQ-OAR-2010-0799.
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Research suggests an adverse impact of vehicle exhaust on plants,
which has in some cases been attributed to aromatic compounds and in
other cases to nitrogen oxides.490 491 492 The impacts of
VOCs on plant reproduction may have long-term implications for
biodiversity and survival of native species near major roadways. Most
of the studies of the impacts of VOCs on vegetation have focused on
short-term exposure and few studies have focused on long-term effects
of VOCs on vegetation and the potential for metabolites of these
compounds to affect herbivores or insects.
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\490\ Viskari E-L. 2000. Epicuticular wax of Norway spruce
needles as indicator of traffic pollutant deposition. Water, Air,
and Soil Pollut. 121:327-337. Docket EPA-HQ-OAR-2010-0799.
\491\ Ugrekhelidze D, F Korte, G Kvesitadze. 1997. Uptake and
transformation of benzene and toluene by plant leaves. Ecotox.
Environ. Safety 37:24-29. Docket EPA-HQ-OAR-2010-0799.
\492\ Kammerbauer H, H Selinger, R Rommelt, A Ziegler-Jons, D
Knoppik, B Hock. 1987. Toxic components of motor vehicle emissions
for the spruce Picea abies. Environ. Pollut. 48:235-243. Docket EPA-
HQ-OAR-2010-0799.
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4. Air Quality Impacts of Non-GHG Pollutants
a. Current Levels of Non-GHG Pollutants
This proposal may have impacts on ambient concentrations of
criteria and air toxic pollutants. Nationally, levels of
PM2.5, ozone, NOX, SOX, CO and air
toxics are declining.\493\ However, approximately 127 million people
lived in counties that exceeded any NAAQS in 2008.\494\ These numbers
do not include the people living in areas where there is a future risk
of failing to maintain or attain the NAAQS. It is important to note
that these numbers do not account for potential ozone,
PM2.5, CO, SO2, NO2 or lead
nonattainment
[[Page 75112]]
areas which have not yet been designated. Further, the majority of
Americans continue to be exposed to ambient concentrations of air
toxics at levels which have the potential to cause adverse health
effects.\495\ The levels of air toxics to which people are exposed vary
depending on where people live and work and the kinds of activities in
which they engage, as discussed in detail in U.S. EPA's recent mobile
source air toxics rule.\496\
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\493\ U.S. EPA (2010) Our Nation's Air: Status and Trends
through 2008. Office of Air Quality Planning and Standards, Research
Triangle Park, NC. Publication No. EPA 454/R-09-002. http://www.epa.gov/airtrends/2010/. Docket EPA-HQ-OAR-2010-0799.
\494\ See U.S. EPA Trends, Note 493.
\495\ U.S. Environmental Protection Agency (2007). Control of
Hazardous Air Pollutants from Mobile Sources; Final Rule. 72 FR
8434, February 26, 2007.
\496\ See U.S. EPA 2007, Note 495.
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b. Impacts of Proposed Standards on Future Ambient Concentrations of
PM2.5, Ozone and Air Toxics
Full-scale photochemical air quality modeling is necessary to
accurately project levels of criteria pollutants and air toxics. For
the final rulemaking, a national-scale air quality modeling analysis
will be performed to analyze the impacts of the standards on
PM2.5, ozone, and selected air toxics (i.e., benzene,
formaldehyde, acetaldehyde, acrolein and 1,3-butadiene). The length of
time needed to prepare the necessary emissions inventories, in addition
to the processing time associated with the modeling itself, has
precluded us from performing air quality modeling for this proposal.
Sections III.G.1 and III.G.2 of the preamble present projections of
the changes in criteria pollutant and air toxics emissions due to the
proposed vehicle standards; the basis for those estimates is set out in
Chapter 4 of the draft RIA. The atmospheric chemistry related to
ambient concentrations of PM2.5, ozone and air toxics is
very complex, and making predictions based solely on emissions changes
is extremely difficult. However, based on the magnitude of the
emissions changes predicted to result from the proposed standards, EPA
expects that there will be an improvement in ambient air quality,
pending a more comprehensive analysis for the final rulemaking.
For the final rulemaking, EPA intends to use a Community Multi-
scale Air Quality (CMAQ) modeling platform as the tool for the air
quality modeling. The CMAQ modeling system is a comprehensive three-
dimensional grid-based Eulerian air quality model designed to estimate
the formation and fate of oxidant precursors, primary and secondary PM
concentrations and deposition, and air toxics, over regional and urban
spatial scales (e.g., over the contiguous United
States).497 498 499 500 The CMAQ model is a well-known and
well-established tool and is commonly used by EPA for regulatory
analyses and by States in developing attainment demonstrations for
their State Implementation Plans. The CMAQ model version 4.7 was most
recently peer-reviewed in February of 2009 for the U.S. EPA.\501\
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\497\ U.S. Environmental Protection Agency, Byun, D.W., and
Ching, J.K.S., Eds, 1999. Science algorithms of EPA Models-3
Community Multiscale Air Quality (CMAQ modeling system, EPA/600/R-
99/030, Office of Research and Development). Docket EPA-HQ-OAR-2010-
0799.
\498\ Byun, D.W., and Schere, K.L., 2006. Review of the
Governing Equations, Computational Algorithms, and Other Components
of the Models-3 Community Multiscale Air Quality (CMAQ) Modeling
System, J. Applied Mechanics Reviews, 59 (2), 51-77. Docket EPA-HQ-
OAR-2010-0799.
\499\ Dennis, R.L., Byun, D.W., Novak, J.H., Galluppi, K.J.,
Coats, C.J., and Vouk, M.A., 1996. The next generation of integrated
air quality modeling: EPA's Models-3, Atmospheric Environment, 30,
1925-1938. Docket EPA-HQ-OAR-2010-0799.
\500\ Carlton, A., Bhave, P., Napelnok, S., Edney, E., Sarwar,
G., Pinder, R., Pouliot, G., and Houyoux, M. Model Representation of
Secondary Organic Aerosol in CMAQv4.7. Ahead of Print in
Environmental Science and Technology. Accessed at: http://pubs.acs.org/doi/abs/10.1021/es100636q?prevSearch=CMAQ&searchHistoryKey Docket EPA-HQ-OAR-2010-
0799.
\501\ Allen, D. et al (2009). Report on the Peer Review of the
Atmospheric Modeling and Analysis Division, National Exposure
Research Laboratory, Office of Research and Development, U.S. EPA.
http://www.epa.gov/asmdnerl/peer/reviewdocs.html Docket EPA-HQ-OAR-
2010-0799.
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CMAQ includes many science modules that simulate the emission,
production, decay, deposition and transport of organic and inorganic
gas-phase and particle-phase pollutants in the atmosphere. EPA intends
to use the most recent version of CMAQ, which reflects updates to
version 4.7 to improve the underlying science. These include aqueous
chemistry mass conservation improvements, improved vertical convective
mixing and lowered CB05 mechanism unit yields for acrolein from 1,3-
butadiene tracer reactions which were updated to be consistent with
laboratory measurements.
5. Other Unquantified Health and Environmental Effects
In addition, EPA seeks comment on whether there are any other
health and environmental impacts associated with advancements in
vehicle GHG reduction technologies that should be considered. For
example, the use of technologies and other strategies to reduce GHG
emissions could have effects on a vehicle's life-cycle impacts (e.g.,
materials usage, manufacturing, end of life disposal), beyond the
issues regarding fuel production and distribution (upstream) GHG
emissions discussed in Section III.C.2. EPA seeks comment on any
studies or research in this area that should be considered in the
future to assess a fuller range of health and environmental impacts
from the light-duty vehicle fleet moving to advanced GHG-reducing
technologies.
EPA is aware of some studies examining the lifecycle GHG emissions,
including vehicle production-related emissions, for advanced technology
vehicles.\502\ The American Iron and Steel Institute (AISI) has
recommended that EPA consider basing future standards on lifecycle
assessments that include vehicle production, use, and end-of-life
impacts; AISI is working on related research with the University of
California, Davis.\503\ At this point, EPA believes there is
insufficient information about the lifecycle impacts of future advanced
technologies to conduct the type of detailed assessments that would be
needed in a regulatory context, but EPA seeks comment on any current or
future studies and research underway on this topic.
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\502\ For examples, see Chapter 6 of NHTSA's Draft Environmental
Impact Statement for this proposed rulemaking, ``Literature
Synthesis of Life-cycle Environmental Impacts of Certain Vehicle
Materials and Technologies,'' Docket NHTSA-2011-0056.
\503\ See AISI comments on the 2012-2016 rulemaking and NOI/
Interim Joint TAR: Document ID EPA-HQ-OAR-2009-0472-7088
and EPA-HQ-OAR-2010-0799-0313, respectively.
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H. What are the estimated cost, economic, and other impacts of the
proposal?
In this section, EPA presents the costs and impacts of the proposed
GHG standards. It is important to note that NHTSA's CAFE standards and
EPA's GHG standards will both be in effect, and each will lead to
average fuel economy increases and CO2 emissions reductions.
The two agencies' standards comprise the National Program, and this
discussion of costs and benefits of EPA's GHG standard does not change
the fact that both the CAFE and GHG standards, jointly, will be the
source of the benefits and costs of the National Program. These costs
and benefits are appropriately analyzed separately by each agency and
should not be added together.
This section outlines the basis for assessing the benefits and
costs of the GHG standards and provides estimates of these costs and
benefits. Some of these effects are private, meaning that they affect
consumers and producers directly in their sales, purchases, and use of
vehicles. These private effects include the increase in vehicle prices
due to costs of the technology, fuel savings, and the benefits of
additional driving and reduced refueling. Other
[[Page 75113]]
costs and benefits affect people outside the markets for vehicles and
their use; these effects are termed external, because they affect
people in ways other than the effect on the market for and use of new
vehicles and are generally not taken into account by the purchaser of
the vehicle. The external effects include the climate impacts, the
effects on non-GHG pollutants, energy security impacts, and the effects
on traffic, accidents, and noise due to additional driving. The sum of
the private and external benefits and costs is the net social benefits
of the standards.
There is some debate about the behavior of private markets in the
context of these standards: If consumers optimize their purchases of
fuel economy, with full information and perfect foresight, in perfectly
efficient markets, they should have already considered these benefits
in their vehicle purchase decisions. If so, then no net private
benefits would result from the program, because consumers would already
buy vehicles with the amount of fuel economy that is optimal for them;
requiring additional fuel economy would alter both the purchase prices
of new cars and their lifetime streams of operating costs in ways that
will inevitably reduce consumers' well-being. Section III.H.1 discusses
this issue more fully.
The net benefits of EPA's proposal consist of the effects of the
proposed standards on:
The vehicle costs;
Fuel savings associated with reduced fuel usage resulting
from the proposed program
Greenhouse gas emissions;
Other air pollutants;
Other impacts, including noise, congestion, accidents;
Energy security impacts;
Changes in refueling events;
Increased driving due to the ``rebound'' effect.
EPA also presents the cost per ton of GHG reductions associated
with the proposed GHG standards on a CO2eq basis, in Section
III.H.3 below.
The total present value of monetized benefits (excluding fuel
savings) under the proposed standards are projected to be between $275
to $764 billion, using a 3 percent discount rate and depending on the
value used for the social cost of carbon. With a 7 percent discount
rate, the total present value of monetized benefits (excluding fuel
savings) under the proposed standards are projected to be between $124
to $614 billion, depending on the value used for the social cost of
carbon. These benefits are summarized below in Table III-80. The
present value of costs of the proposed standards are estimated to be
between $243 to $551 billion for new vehicle technology (assuming a 7
and 3 percent discount rate, respectively), less $579 to $1,510 billion
in savings realized by consumers through fewer fuel expenditures
(calculated using pre-tax fuel prices and using a 7 and 3 percent
discount rate, respectively). These costs are summarized below in Table
III-78 and the fuel savings are summarized in Table III-79. The total
net present value of net benefits under the proposed standards are
projected to be between $1.2 and $1.7 trillion, using a 3 percent
discount rate and depending on the value used for the social cost of
carbon. With a 7 percent discount rate, the total net present value of
net benefits under the proposed standards are projected to be between
$460 billion to $950 billion, depending on the value used for the
social cost of carbon. The estimates developed here use as a baseline
for comparison the greenhouse gas performance and fuel economy
associated with MY 2016 standards. To the extent that greater fuel
economy improvements than those assumed to occur under the baseline may
have occurred due to market forces alone (absent these proposed
standards), the analysis overestimates private and social net benefits.
While NHTSA and EPA each modeled their respective regulatory
programs, the analyses were generally consistent and featured similar
parameters. For this proposal, EPA has not conducted an overall
uncertainty analysis of the impacts associated with its regulatory
program, though it did conduct sensitivity analyses of individual
components of the analysis (e.g., alternative SCC estimates, rebound
effect, battery costs, mass reduction costs, the indirect cost markup
factor, and cost learning curves); these analyses are found in Chapters
3, 4, and 7 of the EPA DRIA. NHTSA, however, conducted a Monte Carlo
simulation of the uncertainty associated with its regulatory program.
The focus of the simulation model was variation around the chosen
uncertainty parameters and their resulting impact on the key output
parameters, fuel savings, and net benefits. Because of the similarities
between the two analyses, EPA references NHTSA RIA Chapters X and XII
as indicative of the relative magnitude, uncertainty and sensitivities
of parameters of the cost/benefit analysis. For the final rule, EPA
plans to perform sensitivity analyses for a wider variety of
parameters. EPA has also analyzed the potential impact of this proposed
rule on vehicle sales and employment. These impacts are not included in
the analysis of overall costs and benefits of the proposed standards.
Further information on these and other aspects of the economic impacts
of EPA's proposed rule are summarized in the following sections and are
presented in more detail in the DRIA for this rulemaking.
EPA requests comment on all aspects of the cost, savings, and
benefits analysis presented here and in the DRIA. EPA also requests
comment on the inputs used in these analyses as described in the Draft
Joint TSD.
1. Conceptual Framework for Evaluating Consumer Impacts
For this proposed rule, EPA projects significant private gains to
consumers in three major areas: (1) Reductions in spending on fuel, (2)
for gasoline-fueled vehicles, time saved due to less refueling, and (3)
additional driving that results from the rebound effect. In
combination, these private benefits, mostly from fuel savings, appear
to outweigh the costs of the standards, even without accounting for
externalities.
Admittedly, these findings pose an economic conundrum. On the one
hand, consumers are expected to gain significantly from the rules, as
the increased cost of fuel efficient cars is smaller than the fuel
savings. Yet many of these technologies are readily available;
financially savvy consumers could have sought vehicles with improved
fuel efficiency, and auto makers seeking those customers could have
offered them. Assuming full information, perfect foresight, perfect
competition, and financially rational consumers and producers, standard
economic theory suggests that normal market operations would have
provided the private net gains to consumers, and the only benefits of
the rule would be due to external benefits. If our analysis projects
net private benefits that consumers have not realized in this perfectly
functioning market, then, with the above assumptions, there must be
additional costs of these private net benefits that are not accounted
for. This calculation assumes that consumers accurately predict and act
on all the fuel-saving benefits they will get from a new vehicle, and
that producers market products providing those benefits. The estimate
of large private net benefits from this rule, then, suggests either
that the assumptions noted above do not hold, or that EPA's analysis
has missed some factor(s) tied to improved fuel economy that reduce(s)
consumer welfare.
[[Page 75114]]
This subsection discusses the economic principles underlying the
assessment of impacts on consumer well-being due to the proposed
changes in the vehicles. Because conventional gasoline- and diesel-
fueled vehicles have quite different characteristics from advanced
technology vehicles (especially electric vehicles), the principles for
these different kinds vehicles are discussed separately below.
a. Conventional Vehicles
For conventional vehicles, the estimates of technology costs
developed for this proposed rule take into account the cost needed to
ensure that vehicle utility (including performance, reliability, and
size) stay constant, except for fuel economy and vehicle price, with
some minor exceptions (e.g., see the discussion of the ``Atkinson-
cycle'' engine and towing capacity in III.D.3). For example, using a 4-
cylinder engine instead of a 6-cylinder engine reduces fuel economy,
but also reduces performance; turbocharging the 4-cylinder engine,
though, produces fuel savings while maintaining performance. The cost
estimates assume turbocharging accompanies engine downsizing. As a
result, if the market for fuel economy is efficient and these cost
estimates are correct, then the existence of large private net benefits
implies that there would need to be some other changed qualities,
missed in the cost estimates, that would reduce the benefits consumers
receive from their vehicles.\504\ We seek comments that identify any
such changed qualities omitted from the analysis. Such comments should
describe how changed qualities affect consumer benefits from vehicles,
and provide cost estimates for eliminating the effects of the changes.
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\504\ It should be noted that adding fuel-saving technology does
not preclude future improvements in performance, safety, or other
attributes, though it is possible that the costs of these additions
may be affected by the presence of fuel-saving technology.
---------------------------------------------------------------------------
The central conundrum observed in this market, that consumers
appear not to purchase products featuring levels of energy efficiency
that are in their economic self-interest, has been referred to as the
Energy Paradox in this setting (and in several others).\505\ There are
many possible reasons discussed in academic research why this might
occur: \506\
---------------------------------------------------------------------------
\505\ Jaffe, A. B., and Stavins, R. N. (1994). ``The Energy
Paradox and the Diffusion of Conservation Technology.'' Resource and
Energy Economics 16(2), 91-122. Docket EPA-HQ-OAR-2010-0799.
\506\ For an overview, see Helfand, Gloria and Ann Wolverton,
``Evaluating the Consumer Response to Fuel Economy: A Review of the
Literature.'' International Review of Environmental and Resource
Economics 5 (2011): 103-146. Docket EPA-HQ-OAR-2010-0799.
---------------------------------------------------------------------------
Consumers might be ``myopic'' and hence undervalue future
fuel savings in their purchasing decisions.
Consumers might lack the information necessary to estimate
the value of future fuel savings, or not have a full understanding of
this information even when it is presented.
Consumer may be accounting for uncertainty in future fuel
savings when comparing upfront cost to future returns.
Consumers may consider fuel economy after other vehicle
attributes and, as such, not optimize the level of this attribute
(instead ``satisficing'' or selecting vehicles that have some
sufficient amount of fuel economy).
Consumers might be especially averse to the short-term
losses associated with the higher prices of energy efficient products
relative to the future fuel savings (the behavioral phenomenon of
``loss aversion'').
Consumers might associate higher fuel economy with
inexpensive, less well designed vehicles.
Even if consumers have relevant knowledge, selecting a
vehicle is a highly complex undertaking, involving many vehicle
characteristics. In the face of such a complicated choice, consumers
may use simplified decision rules.
In the case of vehicle fuel efficiency, and perhaps as a
result of one or more of the foregoing factors, consumers may have
relatively few choices to purchase vehicles with greater fuel economy
once other characteristics, such as vehicle class, are chosen.\507\
---------------------------------------------------------------------------
\507\ For instance, in MY 2010, the range of fuel economy
(combined city and highway) available among all listed 6-cylinder
minivans was 18 to 20 miles per gallon. With a manual-transmission
4-cylinder minivan, it is possible to get 24 mpg. See http://www.fueleconomy.gov, which is jointly maintained by the U.S.
Department of Energy and the EPA.
---------------------------------------------------------------------------
A great deal of work in behavioral economics identifies and
elaborates factors of this sort, which help account for the Energy
Paradox.\508\ This point holds in the context of fuel savings (the main
focus here), but it applies equally to the other private benefits,
including reductions in refueling frequency and additional driving. For
example, it might well be questioned whether significant reductions in
refueling frequency, and corresponding private savings, are fully
internalized when consumers are making purchasing decisions.
---------------------------------------------------------------------------
\508\ Jaffe, A. B., and Stavins, R. N. (1994). ``The Energy
Paradox and the Diffusion of Conservation Technology.'' Resource and
Energy Economics 16(2), 91-122. Docket EPA-HQ-OAR-2010-0799. See
also Allcott and Wozny, supra note.
---------------------------------------------------------------------------
EPA discussed this issue at length in the 2012-2016 light duty
rulemaking and in the medium- and heavy-duty greenhouse gas rulemaking.
See 75 FR at 25510-13; 76 FR 57315-19. Considerable research indicates
that the Energy Paradox may be a real and significant phenomenon,
although the literature has not reached a consensus about the reasons
for its existence. Several researchers have found evidence suggesting
that consumers do not give full or appropriate weight to fuel economy
in purchasing decisions. For example, Sanstad and Howarth \509\ argue
that consumers make decisions without the benefit of full information
by resorting to imprecise but convenient rules of thumb. Some studies
find that a substantial portion of this undervaluation can be explained
by inaccurate assessments of energy savings, or by uncertainty and
irreversibility of energy investments due to fluctuations in energy
prices.\510\ For a number of reasons, consumers may undervalue future
energy savings due to routine mistakes in how they evaluate these
trade-offs. For instance, the calculation of fuel savings is complex,
and consumers may not make it correctly.\511\ The attribute of fuel
economy may be insufficiently salient, leading to a situation in which
[[Page 75115]]
consumers are not willing to pay $1 for an expected $1 present value of
reduced gasoline costs.\512\ Larrick and Soll (2008) find that
consumers do not understand how to translate changes in miles-per-
gallon into fuel savings.\513\ In addition, future fuel price (a major
component of fuel savings) is highly uncertain. Consumer fuel savings
also vary across individuals, who travel different amounts and have
different driving styles. Cost calculations based on the average do not
distinguish between those that may gain or lose as a result of the
policy.\514\ In addition, it is possible that factors that might help
explain why consumers don't purchase more fuel efficiency, such as
transaction costs and differences in quality, may not be adequately
measured.\515\ Studies regularly show that fuel economy plays a role in
consumers' vehicle purchases, but modeling that role is still in
development, and there is no consensus that most consumers make fully
informed tradeoffs.\516\ A review commissioned by EPA finds great
variability in estimates of the role of fuel economy in consumers'
vehicle purchase decisions.\517\ Of 27 studies, significant numbers of
them find that consumers undervalue, overvalue, or value approximately
correctly the fuel savings that they will receive from improved fuel
economy. The variation in the value of fuel economy in these studies is
so high that it appears to be inappropriate to identify one central
estimate of value from the literature. Thus, estimating consumer
response to higher vehicle fuel economy is still unsettled science.
---------------------------------------------------------------------------
\509\ Sanstad, A., and R. Howarth (1994). `` `Normal' Markets,
Market Imperfections, and Energy Efficiency.'' Energy Policy 22(10):
811-818 (Docket EPA-HQ-OAR-2010-0799).
\510\ Greene, D., J. German, and M. Delucchi (2009). ``Fuel
Economy: The Case for Market Failure'' in Reducing Climate Impacts
in the Transportation Sector, Sperling, D., and J. Cannon, eds.
Springer Science (Docket EPA-HQ-OAR-2010-0799); Dasgupta, S., S.
Siddarth, and J. Silva[hyphen]Risso (2007). ``To Lease or to Buy? A
Structural Model of a Consumer's Vehicle and Contract Choice
Decisions.'' Journal of Marketing Research 44: 490-502 (Docket EPA-
HQ-OAR-2010-0799); Metcalf, G., and D. Rosenthal (1995). ``The `New'
View of Investment Decisions and Public Policy Analysis: An
Application to Green Lights and Cold Refrigerators,'' Journal of
Policy Analysis and Management 14: 517-531 (Docket EPA-HQ-OAR-2010-
0799); Hassett, K., and G. Metcalf (1995), ``Energy Tax Credits and
Residential Conservation Investment: Evidence from Panel Data,''
Journal of Public Economics 57: 201-217 (Docket EPA-HQ-OAR-2010-
0799); Metcalf, G., and K. Hassett (1999), ``Measuring the Energy
Savings from Home Improvement Investments: Evidence from Monthly
Billing Data,'' The Review of Economics and Statistics 81(3): 516-
528 (Docket EPA-HQ-OAR-2010-0799); van Soest D., and E. Bulte
(2001), ``Does the Energy[hyphen]Efficiency Paradox Exist?
Technological Progress and Uncertainty.'' Environmental and Resource
Economics 18: 101-12 (Docket EPA-HQ-OAR-2010-0799).
\511\ Turrentine, T. and K. Kurani (2007). ``Car Buyers and Fuel
Economy?'' Energy Policy 35: 1213-1223 (Docket EPA-HQ-OAR-2009-
0472); Larrick, R. P., and J.B. Soll (2008). ``The MPG illusion.''
Science 320: 1593-1594 (Docket EPA-HQ-OAR-2010-0799).
\512\ Allcott, Hunt, and Nathan Wozny, ``Gasoline Prices, Fuel
Economy, and the Energy Paradox'' (2010), available at http://web.mit.edu/allcott/www/Allcott%20and%20Wozny%202010%20-%20Gasoline%20Prices,%20Fuel%20Economy,% (Docket EPA-HQ-OAR-2010-
0799). U.S. Department of Energy, 2011. ``Transportation and the
Economy,'' Chapter 10 in ``Transportation Energy Data Book,'' http://cta.ornl.gov/data/tedb30/Edition30_Chapter10.pdf, Table 10.13,
estimates that gas and oil costs were 15.4% of vehicle costs per
mile in 2010.
\513\ Sanstad, A., and R. Howarth (1994). `` `Normal' Markets,
Market Imperfections, and Energy Efficiency.''Energy Policy 22(10):
811-818 (Docket EPA-HQ-OAR-2010-0799); Larrick, R. P., and J.B. Soll
(2008). ``The MPG illusion.'' Science 320: 1593-1594 (Docket EPA-HQ-
OAR-2010-0799).
\514\ Hausman J., Joskow P. (1982). ``Evaluating the Costs and
Benefits of Appliance Efficiency Standards.'' American Economic
Review 72: 220-25 (Docket EPA-HQ-OAR-2010-0799).
\515\ Jaccard, Mark. ``Paradigms of Energy Efficiency's Cost and
their Policy Implications: D[eacute]j[agrave] Vu All Over Again.''
Modeling the Economics of Greenhouse Gas Mitigation: Summary of a
Workshop, K. John Holmes, Rapporteur. National Academies Press,
2010. http://www.nap.edu/openbook.php?record_id=13023&page=42
(Docket EPA-HQ-OAR-2010-0799).
\516\ E.g., Goldberg, Pinelopi Koujianou, ``Product
Differentiation and Oligopoly in International Markets: The Case of
the U.S. Automobile Industry,'' Econometrica 63(4) (July 1995): 891-
951 (Docket EPA-HQ-OAR-2010-0799); Goldberg, Pinelopi Koujianou,
``The Effects of the Corporate Average Fuel Efficiency Standards in
the U.S.,'' Journal of Industrial Economics 46(1) (March 1998): 1-33
(Docket EPA-HQ-OAR-2010-0799); Busse, Meghan R., Christopher R.
Knittel, and Florian Zettelmeyer (2009). ``Pain at the Pump: How
Gasoline Prices Affect Automobile Purchasing in New and Used
Markets,'' Working paper (accessed 11/1/11), available at http://web.mit.edu/knittel/www/papers/gaspaper_latest.pdf (Docket EPA-HQ-
OAR-2010-0799).
\517\ Greene, David L. ``How Consumers Value Fuel Economy: A
Literature Review.'' EPA Report EPA-420-R-10-008, March 2010 (Docket
EPA-HQ-OAR-2010-0799).
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EPA and NHTSA recently revised the fuel economy label on new
vehicles in ways intended to improve information for consumers.\518\
For instance, it presents fuel consumption data in addition to miles
per gallon, in response to the concern over the difficulties of
translating mpg into fuel savings; it also reports expected fuel
savings or additional costs relative to an average vehicle. Whether the
new label will help consumers to overcome the ``energy paradox'' is not
known at this point. A literature review that contributed to the fuel
economy labeling rule points out that consumers increasingly do a great
deal of research on the internet before going to an auto dealer.\519\
To the extent that the label improves consumers' understanding of the
value of fuel economy, purchase decisions could change. Until the newly
revised labels enter the marketplace with MY 2013 vehicles (or
optionally sooner), the agencies may not be able to determine how
vehicle purchase decisions are likely to change as a result of the new
labels.
---------------------------------------------------------------------------
\518\ Environmental Protection Agency and Department of
Transportation, ``Revisions and Additions to Motor Vehicle Fuel
Economy Label,'' Federal Register 76(129) (July 6, 2011): 39478-
39587.
\519\ PRR, Inc., ``Environmental Protection Agency Fuel Economy
Label: Literature Review.'' EPA-420-R-10-906, August 2010, available
at http://www.epa.gov/fueleconomy/label/420r10906.pdf 2010 (Docket
EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------
If there is a difference between expected fuel savings and
consumers' willingness to pay for those fuel savings, the next question
is, which is the appropriate measure of consumer benefit? Fuel savings
measure the actual monetary value that consumers will receive after
purchasing a vehicle; the willingness to pay for fuel economy measures
the value that, before a purchase, consumers place on additional fuel
economy. As noted, there are a number of reasons that consumers may
incorrectly estimate the benefits that they get from improved fuel
economy, including risk or loss aversion, and poor ability to calculate
savings. Also as noted, fuel economy may not be as salient as other
vehicle characteristics when a consumer is considering vehicles. If
these arguments are valid, then there will be significant gains to
consumers of the government mandating additional fuel economy.
While acknowledging the conundrum, EPA continues to value fuel
savings from the proposed standards using the projected market value
over the vehicles' entire lifetimes, and to report that value among
private benefits of the proposed rule. Improved fuel economy will
significantly reduce consumer expenditures on fuel, thus benefiting
consumers. Real money is being saved and accrued by the initial buyer
and subsequent owners. In addition, using a measure based on consumer
consideration at the time of vehicle purchase would involve a very wide
range of uncertainty, due to the lack of consensus on the value of
additional fuel economy in vehicle choice models. Due partly to this
factor, it is true that limitations in modeling affect our ability to
estimate how much of these savings would have occurred in the absence
of the rule. For example, some of the technologies predicted to be
adopted in response to the rule may already be in the deployment
process due to shifts in consumer demand for fuel economy, or due to
expectations by auto makers of future GHG/fuel economy standards. It is
not impossible that some of these savings would have occurred in the
absence of the proposed standards.\520\ To the extent that greater fuel
economy improvements than those assumed to occur under the baseline may
have occurred due to market forces alone (absent the proposed
standards), the analysis overestimates private and social benefits and
costs. As discussed below, limitations in modeling also affect our
ability to estimate the effects of the rule on net benefits in the
market for vehicles.
---------------------------------------------------------------------------
\520\ However, as discussed at section III.D above, the
assumption of a flat baseline absent this rule rests on strong
historic evidence of lack of increase in fuel economy absent either
regulatory control or sharply rising fuel prices.
---------------------------------------------------------------------------
Consumer vehicle choice models estimate what vehicles consumers buy
based on vehicle and consumer characteristics. In principle, such
models could provide a means of understanding both the role of fuel
economy in consumers' purchase decisions and the effects of this rule
on the benefits that consumers will get from vehicles. Helfand and
Wolverton discuss the wide variation in the
[[Page 75116]]
structure and results of these models.\521\ Models or model results
have not frequently been systematically compared to each other. When
they have, the results show large variation over, for instance, the
value that consumers place on additional fuel economy.
---------------------------------------------------------------------------
\521\ Helfand, Gloria and Ann Wolverton, ``Evaluating the
Consumer Response to Fuel Economy: A Review of the Literature.''
International Review of Environmental and Resource Economics 5
(2011): 103-146 (Docket EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------
In order to develop greater understanding of these models, EPA is
in the process of developing a vehicle choice model. It uses a ``nested
logit'' structure common in the vehicle choice modeling literature.
``Nesting'' refers to the decision-tree structure of buyers' choices
among vehicles the model employs, and ``logit'' refers to the specific
pattern by which buyers' choices respond to differences in the overall
utility that individual vehicle models and their attributes
provide.\522\ The nesting structure in EPA's model involves a hierarchy
of choices. In its current form, at the initial decision node,
consumers choose between buying a new vehicle or not. Conditional on
choosing a new vehicle, consumers then choose among passenger vehicles,
cargo vehicles, and ultra-luxury vehicles. The next set of choices
subdivides each of these categories into vehicle type (e.g., standard
car, minivan, SUV, etc.). Next, the vehicle types are divided into
classes (small, medium, and large SUVs, for instance), and then, at the
bottom, are the individual models. At this bottom level, vehicles that
are similar to each other (such as standard subcompacts, or prestige
large vehicles) end up in the same ``nest.'' Substitution within a nest
is considered much more likely than substitution across nests, because
the vehicles within a nest are more similar to each other than vehicles
in different nests. For instance, a person is more likely to substitute
between a Chevrolet Aveo and a Toyota Yaris (both subcompacts) than
between an Aveo and a pickup truck. In addition, substitution is
greater at low decision nodes (such as individual vehicles) than at
higher decision nodes (such as the buy/no buy decision), because there
are more choices at lower levels than at higher levels. Parameters for
the model (including demand elasticities and the value of fuel economy
in purchase decisions) are being selected based on a review of values
found in the literature on vehicle choice modeling. Additional
discussion of this model can be found in Chapter 8.1.2.8 of the DRIA.
The model is still undergoing development; the agency will seek peer
review on it before it is utilized. In addition, concerns remain over
the ability of any vehicle choice model to make reasonable predictions
of the response of the total number and composition of new vehicle
sales to changes in the prices and characteristics of specific vehicle
models. EPA seeks comments on the use of vehicle choice modeling for
predicting changes in sales mix due to policies, and on methods to test
the ability of a vehicle choice model to produce reasonable estimates
of changes in fleet mix.
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\522\ Logit refers to a statistical analysis method used for
analyzing the factors that affect discrete choices (i.e., yes/no
decisions or the choice among a countable number of options).
---------------------------------------------------------------------------
The next issue is the potential for loss in consumer welfare due to
the rule. As mentioned above (and discussed more thoroughly in Section
III.D.3 of this preamble), the technology cost estimates developed here
for conventional vehicles take into account the costs to hold other
vehicle attributes, such as size and performance, constant.\523\ In
addition, the analysis assumes that the full technology costs are
passed along to consumers. With these assumptions, because welfare
losses are monetary estimates of how much consumers would have to be
compensated to be made as well off as in the absence of the
change,\524\ the price increase measures the loss to the buyer.\525\
Assuming that the full technology cost gets passed along to the buyer
as an increase in price, the technology cost thus measures the welfare
loss to the consumer. Increasing fuel economy would have to lead to
other changes in the vehicles that consumers find undesirable for there
to be additional losses not bounded by the technology costs.
---------------------------------------------------------------------------
\523\ If the reference-case vehicles include different vehicle
characteristics, such as improved acceleration or towing capacity,
then the costs for the proposed standards would be, as here, the
costs of adding compliance technologies to those reference-case
vehicles. These costs may differ from those estimated here, due to
our lack of information on how those vehicle characteristics might
change between now and 2025.
\524\ This approach describes the economic concept of
compensating variation, a payment of money after a change that would
make a consumer as well off after the change as before it. A related
concept, equivalent variation, estimates the income change that
would be an alternative to the change taking place. The difference
between them is whether the consumer's point of reference is her
welfare before the change (compensating variation) or after the
change (equivalent variation). In practice, these two measures are
typically very close together for marketed goods.
\525\ Indeed, it is likely to be an overestimate of the loss to
the consumer, because the consumer has choices other than buying the
same vehicle with a higher price; she could choose a different
vehicle, or decide not to buy a new vehicle. The consumer would
choose one of those options only if the alternative involves less
loss than paying the higher price. Thus, the increase in price that
the consumer faces would be the upper bound of loss of consumer
welfare, unless there are other changes to the vehicle due to the
fuel economy improvements, unaccounted for in the costs, that make
the vehicle less desirable to consumers.
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b. Electric Vehicles and Other Advanced Technology Vehicles
This proposal finds that electric vehicles (EVs) may form a part
(albeit limited) of some manufacturers' compliance strategy. The
following discussion will focus on EVs, because they are expected to
play more of a role in compliance than vehicles with other alternative
fuels, but related issues may arise for other alternatively fueled
vehicles. It should be noted that EPA's projection of the penetration
of EVs in the MY 2025 fleet is very small (under 3%).
Electric vehicles (EVs), at the time of this rulemaking, have very
different refueling infrastructures than conventional gasoline- or
diesel-fueled vehicles: Refueling EVs requires either access to
electric charging facilities or battery replacement. In addition,
because of the expense of increased battery capacity, EVs commonly have
a smaller driving range than conventional vehicles. Because of these
differences, the vehicles cannot be considered conventional vehicles
unmodified except for cost and fuel economy. As a result, the consumer
welfare arguments presented above need to be modified to account for
these differences.
A first important point to observe is that, although auto makers
are required to comply with the proposed standards, producing EVs as a
compliance strategy is not specifically required. Auto makers will
choose to provide EVs either if they have few alternative ways to
comply, or if EVs are, for some range of production, likely to be more
profitable (or less unprofitable) than other ways of complying.
From the consumer perspective, it is important to observe that
there is no mandate for any consumer to choose any particular kind of
vehicle. An individual consumer will buy an EV only if the price and
characteristics of the vehicle make it more attractive to her than
other vehicles. If the range of vehicles in the conventional fleet does
not shrink, the availability of EVs should not reduce consumer welfare
compared to a fleet with no EVs: Increasing options should not reduce
consumer well-being, because other existing options still are
available. On the other hand, if the variety of vehicles in the
conventional market does change, there may be consumers who are forced
[[Page 75117]]
to substitute to alternative vehicles. The use of the footprint-based
standard is intended in part to help maintain the diversity of vehicle
sizes. Because the agencies do not expect any vehicle classes to become
unavailable, consumers who buy EVs therefore are expected to choose
them voluntarily, in preference to the other vehicles available to
them.
From a practical perspective, the key issue is whether the consumer
demand for EVs is large enough to absorb all the EVs that automakers
will produce in order to comply with these standards, or whether
automakers will need to increase consumer purchases by providing
subsidies to consumers. If enough consumers find EVs more attractive
than other vehicles, and automakers therefore do not need to subsidize
their purchase, then both consumers and producers will benefit from the
introduction of EVs. On the other hand, it is possible that automakers
will find EVs to be part of a cost-effective compliance technology but
nevertheless need to price them below cost them to sell sufficient
numbers. If so, then there is a welfare loss associated with the sale
of EVs beyond those that would be sold in the free market. The
deadweight loss can be approximated as one-half of the size of the
subsidy needed for the marginal purchaser, times the number of sales
that would need the subsidy. Estimating this value would require
knowing the number of sales necessary beyond the expected sales level
in an unregulated market, and the amount of the subsidy that would be
necessary to induce the desired number of sales. Given the fledgling
state of the market for EVs, neither of these values is easily knowable
for the 2017 to 2025 time frame.
A number of factors will affect the likelihood of consumer
acceptance of EVs. People with short commutes may find little obstacle
in the relatively short driving range, but others who regularly drive
long distances may find EVs' ranges limiting. The reduced tailpipe
emissions and reduced noise may be attractive features to some
consumers.\526\ Recharging at home could be a convenient, desirable
feature for people who have garages with electric charging capability,
but not for people who park on the street. If an infrastructure
develops for recharging vehicles with the convenience approaching that
of buying gasoline, range or home recharging may become less of a
barrier to purchase. Of course, other attributes of the marketed EVs,
such as their performance and their passenger and storage capacity,
will also affect the share of consumers who will consider them. As
infrastructure, EV technology, and costs evolve over time, consumer
interest in EVs will adjust as well. Thus, modeling consumer response
to advanced technology vehicles in the 2017-2025 time frame poses even
more challenges than those associated with modeling consumer response
for conventional vehicles.
---------------------------------------------------------------------------
\526\ For instance, Hidrue et al. (Hidrue, Michael K., George R.
Parsons, Willett Kempton, and Meryl P. Gardner. ``Willingness to Pay
for Electric Vehicles and their Attributes.'' Resource and Energy
Economics 33(3) (2011): 686-705 (Docket EPA-HQ-OAR-2010-0799)) find
that some consumers are willing to pay $5100 for vehicles with 95%
lower emissions than the vehicles they otherwise aim to purchase.
---------------------------------------------------------------------------
Because range is a major factor in EV acceptability, it is starting
to draw attention in the research community. For instance, several
studies have examined consumers' willingness to pay for increased
vehicle range. Results vary, depending on when the survey was conducted
(studies from the early 1990s have much higher values than more recent
studies) and on household income and other demographic factors; some
find range to be statistically indistinguishable from zero, while
others find the value of increasing range from 150 to 300 miles to be
as much as $59,000 (2009$) (see RIA Chapter 8 for more discussion).
Other research has examined how the range limitation may affect
driving patterns. Pearre et al. observed daily driving patterns for 484
vehicles in the Atlanta area over a year.\527\ In their sample, 9
percent of vehicles never exceeded 100 miles in one day, and 21 percent
never exceeded 150 miles in one day. Lin and Greene compared the cost
of reduced range to the cost of additional battery capacity for
EVs.\528\ They find that an ``optimized'' range of about 75 miles would
be sufficient for 98% of days for ``modest'' drivers (those who average
about 25 miles per day); the optimized EV range for ``average'' drivers
(who average about 43 miles per day), close to 120 miles, would meet
their needs on 97 percent of days. Turrentine et al. studied drivers
who leased MINI E EVs (a conversion of the MINI Cooper) for a
year.\529\ They found that drivers adapted their driving patterns in
response to EV ownership: For instance, they modified where they
shopped and increased their use of regenerative braking in order to
reduce range as a constraint. These finding suggest that, for some
consumers, range may be a limiting factor only occasionally. If those
consumers are willing to consider alternative ways of driving long
distances, such as renting a gasoline vehicle or exchanging vehicles
within the household, then limited range may not be a barrier to
adoption for them. These studies also raise the question whether
analysis of EV use should be based on the driving patterns from
conventional vehicles, because consumers may use EVs differently than
conventional vehicles.
---------------------------------------------------------------------------
\527\ Pearre, Nathaniel S., Willett Kempton, Randall L.
Guensler, and Vetri V. Elango. ``Electric vehicles: How much range
is required for a day's driving?'' Transportation Research Part C
19(6) (2011): 1171-1184 (Docket EPA-HQ-OAR-2010-0799).
\528\ Lin, Zhenhong, and David Greene. ``Rethinking FCV/BEV
Vehicle Range: A Consumer Value Trade-off Perspective.'' The 25th
World Battery, Hybrid and Fuel Cell Electric Vehicle Symposium and
Exhibition, Shenzhen, China, Nov. 5-9, 2010 (Docket EPA-HQ-OAR-2010-
0799).
\529\ Turrentine, Tom, Dahlia Garas, Andy Lentz, and Justin
Woodjack. ``The UC Davis MINI E Consumer Study.'' UC Davis Institute
of Transportation Research Report UCD-ITS-RR-11-05, May 4, 2011
(Docket EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------
EVs themselves are expected to change over time, as battery
technologies and costs develop. In addition, consumer interest in EVs
is likely to change over time, as early adopters share their
experiences. The initial research in the area suggests that consumers
put a high value on increased range, though this value appears to be
changing over time. The research also suggests that some segments of
the driving public may experience little, if any, restriction on their
driving due to range limitations if they were to purchase EVs. At this
time it is not possible to estimate whether the number of people who
will choose to purchase EVs at private-market prices will be more or
less than the number that auto makers are expected to produce to comply
with the standards. We note that our projections of technology
penetrations indicate that a very small portion (fewer than 3 percent)
of new vehicles produced in 2025 will need to be EVs. For the purposes
of the analysis presented here for this proposal, we assume that the
consumer market will be sufficient to absorb the number of EVs expected
to be used for compliance under this rule. We seek comment and further
research that might provide evidence on the consumer market for EVs in
the 2017-2025 period.
c. Summary
The Energy Paradox, also known as the efficiency gap, raises the
question, why do private markets not provide energy savings that
engineering, technology cost analyses find are cost-
[[Page 75118]]
effective? Though a number of hypotheses have been raised to explain
the paradox, studies have not been able at this time to identify the
relative importance of different explanations. As a result, it is not
possible at this point to state with any degree of certainty whether
the market for fuel efficiency is operating efficiently, or whether the
market has failings.
For conventional vehicles, the key implication is that the there
may be two different estimates of the value of fuel savings. One value
comes from the engineering estimates, based on consumers' expected
driving patterns over the vehicle's lifetime; the other value is what
the consumer factors into the purchase decision when buying a vehicle.
Although economic theory suggests that these two values should be the
same in a well functioning market, if engineering estimates accurately
measure fuel savings that consumers will experience, the available
evidence does not provide support for that theory. The fuel savings
estimates presented here are based on expected consumers' in-use fuel
consumption rather than the value they estimate at the time that they
consider purchasing a vehicle. Though the cost estimates may not have
taken into account some changes that consumers may not find desirable,
those omitted costs would have to be of very considerable magnitude to
have a significant effect on the net benefits of this rule. The costs
imposed on the consumer are measured by the costs of the technologies
needed to comply with the standards. Because the cost estimates have
built into them the costs required to hold other vehicle attributes
constant, then, in principle, compensating consumers for the increased
costs would hold them harmless, even if they paid no attention to the
fuel efficiency of vehicles when making their purchase decisions.
For electric vehicles, and perhaps for other advanced-technology
vehicles, other vehicle attributes are not expected to be held
constant. In particular, their ranges and modes of refueling will be
different from those of conventional vehicles. From a social welfare
perspective, the key question is whether the number of consumers who
will want to buy EVs at their private-market prices will exceed the
number that auto makers are expected to produce to comply with the
standards. If too few consumers are willing to buy them at their
private-market prices, then auto makers will have to subsidize their
prices. Though current research finds that consumers typically have a
high value for increasing the range of EVs (and thus would consider a
shorter range a cost of an EV), current research also suggests that
consumers may find ways to adapt to the shorter range so that it is
less constraining. The technologies, prices, infrastructure, and
consumer experiences associated with EVs are all expected to evolve
between the present and the period when this rule becomes effective.
The analysis in this proposal assumes that the consumer market is
sufficient to absorb the expected number of EVs without subsidies.
We seek comment and further research on the efficiency of the
market for fuel economy for conventional vehicles and on the likely
size of the consumer market for EVs in 2017-2025.
2. Costs Associated With the Vehicle Standards
In this section, EPA presents our estimate of the costs associated
with the proposed vehicle program. The presentation here summarizes the
vehicle level costs associated with the new technologies expected to be
added to meet the proposed GHG standards, including hardware costs to
comply with the proposed A/C credit program. The analysis summarized
here provides our estimate of incremental costs on a per vehicle basis
and on an annual total basis.
The presentation here summarizes the outputs of the OMEGA model
that was discussed in some detail in Section III.D of this preamble.
For details behind the analysis such as the OMEGA model inputs and the
estimates of costs associated with individual technologies, the reader
is directed to Chapter 1 of the EPA's draft RIA and Chapter 3 of the
draft Joint TSD. For more detail on the outputs of the OMEGA model and
the overall vehicle program costs summarized here, the reader is
directed to Chapters 3 and 5 of EPA's draft RIA.
With respect to the aggregate cost estimations presented here, EPA
notes that there are a number of areas where the results of our
analysis may be conservative and, in general, EPA believes we have
directionally overestimated the costs of compliance with these new
standards, especially in not accounting for the full range of credit
opportunities available to manufacturers. For example, some cost saving
programs are considered in our analysis, such as full car/truck
trading, while others are not, such as advanced vehicle technology
credits.
a. Costs per Vehicle
To develop costs per vehicle, EPA has used the same methodology as
that used in the recent 2012-2016 final rule and the 2010 TAR.
Individual technology direct manufacturing costs have been estimated in
a variety of ways--vehicle and technology tear down, models developed
by outside organizations, and literature review--and indirect costs
have been estimated using the updated and revised indirect cost
multiplier (ICM) approach that was first developed for the 2012-2016
final rule. All of these individual technology costs are described in
detail in Chapter 3 of the draft joint TSD. Also described there are
the ICMs used in this proposal and the ways the ICMs have been updated
and revised since the 2012-2016 final rule which results in
considerably higher indirect costs in this proposal than estimated in
the 2012-2016 final rule. Further, we describe in detail the
adjustments to technology costs to account for manufacturing learning
and the cost reductions that result from that learning. We note here
that learning impacts are applied only to direct manufacturing costs
which differs from the 2012-2016 final rule which applied learning to
both direct and indirect costs. Lastly, we have included costs
associated with stranded capital (i.e., capital investments that are
not fully recaptured by auto makers because they would be forced to
update vehicles on a more rapid schedule than they may have intended
absent this proposal). Again, this is detailed in Chapter 3 of the
draft joint TSD.
EPA then used the technology costs to build GHG and fuel
consumption reducing packages of technologies for each of 19 different
vehicle types meant to fully represent the range of baseline vehicle
technologies in the marketplace (i.e., number of cylinders, valve train
configuration, vehicle class). This package building process as well as
the process we use to determine the most cost effective packages for
each of the 19 vehicle types is detailed in Chapter 1 of EPA's draft
RIA. These packages are then used as inputs to the OMEGA model to
estimate the most cost effective means of compliance with the proposed
standards giving due consideration to the timing required for
manufacturers to implement the needed technologies. That is, we assume
that manufacturers cannot add the full suite of needed technologies in
the first year of implementation. Instead, we expect them to add
technologies to vehicles during the typical 4 to 5 year redesign cycle.
As such, we expect that every vehicle can be redesigned to add
significant levels of new technology every 4 to 5 years. Further, we do
not expect manufacturers to redesign or refresh vehicles at a pace more
rapid
[[Page 75119]]
than the industry standard four to five year cycle.
The results, including costs associated with the air conditioning
program and estimates of stranded capital as described in Chapter 3 of
the draft joint TSD, are shown in Table III-65.
[GRAPHIC] [TIFF OMITTED] TP01DE11.129
b. Annual Costs of the Proposed National Program
The costs presented here represent the incremental costs for newly
added technology to comply with the proposed program. Together with the
projected increases in car and truck sales, the increases in per-car
and per-truck average costs shown in Table III-65, above result in the
total annual costs presented in Table III-66 below. Note that the costs
presented in Table III-66 do not include the fuel savings that
consumers would experience as a result of driving a vehicle with
improved fuel economy. Those impacts are presented in Section III.H.4.
Note also that the costs presented here represent costs estimated to
occur presuming that the proposed MY 2025 standards would continue in
perpetuity. Any changes to the proposed standards would be considered
as part of a future rulemaking. In other words, the proposed standards
would not apply only to 2017-2025 model year vehicles--they would, in
fact, apply to all 2025 and later model year vehicles.
[[Page 75120]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.130
[[Page 75121]]
3. Cost per Ton of Emissions Reduced
EPA has calculated the cost per ton of GHG reductions associated
with the proposed GHG standards on a CO2eq basis using the
costs and the emissions reductions described in Section III.F. These
values are presented in Table III-67 for cars, trucks and the combined
fleet. The cost per metric ton of GHG emissions reductions has been
calculated in the years 2020, 2030, 2040, and 2050 using the annual
vehicle compliance costs and emission reductions for each of those
years. The value in 2050 represents the long-term cost per ton of the
emissions reduced. EPA has also calculated the cost per metric ton of
GHG emission reductions including the savings associated with reduced
fuel consumption (presented below in Section III.H.4). This latter
calculation does not include the other benefits associated with this
program such as those associated with energy security benefits as
discussed later in Section III. By including the fuel savings, the cost
per ton is generally less than $0 since the estimated value of fuel
savings outweighs the program costs.
[GRAPHIC] [TIFF OMITTED] TP01DE11.131
[[Page 75122]]
4. Reduction in Fuel Consumption and Its Impacts
a. What are the projected changes in fuel consumption?
The proposed CO2 standards will result in significant
improvements in the fuel efficiency of affected vehicles. Drivers of
those vehicles will see corresponding savings associated with reduced
fuel expenditures. EPA has estimated the impacts on fuel consumption
for both the tailpipe CO2 standards and the A/C credit
program. While gasoline consumption would decrease under the proposed
GHG standards, electricity consumption would increase slightly due to
the small penetration of EVs and PHEVs (1-3% for the 2021 and 2025
MYs). The fuel savings includes both the gasoline consumption
reductions and the electricity consumption increases. Note that the
total number of miles that vehicles are driven each year is different
under the control case than in the reference case due to the ``rebound
effect,'' which is discussed in Section III.H.4.c and in Chapter 4 of
the draft joint TSD. EPA also notes that consumers who drive more than
our average estimates for vehicle miles traveled (VMT) will experience
more fuel savings; consumers who drive less than our average VMT
estimates will experience less fuel savings.
The expected impacts on fuel consumption are shown in Table III-68.
The gallons reduced and kilowatt hours increased (kWh) as shown in the
tables reflect impacts from the proposed CO2 standards,
including the A/C credit program, and include increased consumption
resulting from the rebound effect.
[[Page 75123]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.132
b. What are the fuel savings to the consumer?
Using the fuel consumption estimates presented in Section
III.H.4.a, EPA can calculate the monetized fuel savings associated with
the proposed standards. To do this, we multiply reduced fuel
consumption in each year by the corresponding estimated average fuel
price in that year, using the reference case taken from the AEO 2011
Final Release.\530\ These estimates do not
[[Page 75124]]
account for the significant uncertainty in future fuel prices; the
monetized fuel savings would be understated if actual future fuel
prices are higher (or overstated if fuel prices are lower) than
estimated. AEO is a standard reference used by NHTSA and EPA and many
other government agencies to estimate the projected price of fuel. This
has been done using both the pre-tax and post-tax gasoline prices.
Since the post-tax gasoline prices are the prices paid at fuel pumps,
the fuel savings calculated using these prices represent the savings
consumers would see. The pre-tax fuel savings are those savings that
society would see. Assuming no change in gasoline tax rates, the
difference between these two columns represents the reduction in fuel
tax revenues that will be received by state and federal governments--
about $82 million in 2017 and $17 billion by 2050. These results are
shown in Table III-69. Note that in Section III.H.9, the overall
benefits and costs of the proposal are presented and, for that reason,
only the pre-tax fuel savings are presented there.
---------------------------------------------------------------------------
\530\ In the Preface to AEO 2011, the Energy Information
Administration describes the reference case. They state that,
``Projections by EIA are not statements of what will happen but of
what might happen, given the assumptions and methodologies used for
any particular scenario. The Reference case projection is a
business-as-usual trend estimate, given known technology and
technological and demographic trends.
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[[Page 75125]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.133
As shown in Table III-69, the agencies are projecting that
consumers would realize very large fuel savings as a result of the
proposed standards. As discussed further in the introductory paragraphs
of Section III.H.1, it is a conundrum from an economic perspective that
these large fuel savings have not been provided by automakers
[[Page 75126]]
and purchased by consumers. A number of behavioral and market phenomena
may lead to this disparity between the fuel economy that makes
financial sense to consumers and the fuel economy they purchase.
Regardless how consumers make their decisions on how much fuel economy
to purchase, EPA expects that, in the aggregate, they will gain these
fuel savings, which will provide actual money in consumers' pockets.
c. VMT Rebound Effect
The rebound effect refers to the increase in vehicle use that
results if an increase in fuel efficiency lowers the cost per mile of
driving. For this proposal, EPA is using an estimate of 10 percent for
the rebound effect (i.e., we assume a 10 percent decrease in fuel cost
per mile from our proposed standards would result in a 1 percent
increase in VMT).
As we discussed in the 2012-2016 rulemaking and in Chapter 4 of the
Joint TSD, this value was not derived from a single point estimate from
a particular study, but instead represents a reasonable compromise
between the historical estimates and the projected future estimates.
This value is consistent with the rebound estimate for the most recent
time period analyzed in the Small and Van Dender 2007 paper,\531\ and
falls within the range of the larger body of historical work on the
rebound effect.\532\ Recent work by David Greene on the rebound effect
for light-duty vehicles in the U.S. supports the hypothesis that the
rebound effect is decreasing over time,\533\ which could mean that
rebound estimates based on recent time period data may be more reliable
than historical estimates that are based on older time period data. New
work by Hymel, Small, and Van Dender also supports the theory that the
rebound effect is declining over time, although the Hymel et al.
estimates are higher than the 2007 Small and Van Dender estimates.\534\
Furthermore, by using an estimate of the future rebound effect,
analysis by Small and Greene show that the rebound effect could be in
the range of 5% or lower.\535\
---------------------------------------------------------------------------
\531\ Small, K. and K. Van Dender, 2007. ``Fuel Efficiency and
Motor Vehicle Travel: The Declining Rebound Effect'', The Energy
Journal, vol. 28, no. 1, pp. 25-51 (Docket EPA-HQ-OAR-2010-0799).
\532\ Sorrell, S. and J. Dimitropoulos, 2007. ``UKERC Review of
Evidence for the Rebound Effect, Technical Report 2: Econometric
Studies'', UKERC/WP/TPA/2007/010, UK Energy Research Centre, London,
October (Docket EPA-HQ-OAR-2010-0799).
\533\ Greene, David, ``Rebound 2007: Analysis of National Light-
Duty Vehicle Travel Statistics,'' February 9, 2010 (Docket EPA-HQ-
OAR-2010-0799). This paper has been accepted for an upcoming special
issue of Energy Policy, although the publication date has not yet
been determined.
\534\ Hymel, Kent M., Kenneth A. Small, and Kurt Van Dender,
``Induced demand and rebound effects in road transport,''
Transportation Research Part B: Methodological, Volume 44, Issue 10,
December 2010, Pages 1220-1241, ISSN 0191-2615, DOI: 10.1016/
j.trb.2010.02.007. (Docket EPA-HQ-OAR-2010-0799).
\535\ Report by Kenneth A. Small of University of California at
Irvine to EPA, ``The Rebound Effect from Fuel Efficiency Standards:
Measurement and Projection to 2030'', June 12, 2009 (Docket EPA-HQ-
OAR-2010-0799). See also Greene, 2010.
---------------------------------------------------------------------------
Most studies that estimate the rebound effect use the fuel cost per
mile of driving or gasoline prices as a surrogate for fuel efficiency.
Recent work conducted by Kenneth Gillingham, however, provides
suggestive evidence that consumers may be less responsive to changes in
fuel efficiency than to changes in fuel prices.\536\ While this
research pertains specifically to California, this finding suggests
that the common assumption that consumers respond similarly to changes
in gasoline prices and changes in fuel efficiency may overstate the
potential rebound effect. Additional research is needed in this area,
and EPA requests comments and data on this topic.
---------------------------------------------------------------------------
\536\ Gillingham, Kenneth. ``The Consumer Response to Gasoline
Price Changes: Empirical Evidence and Policy Implications.'' Ph.D.
diss., Stanford University, 2011. (Docket EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------
Another factor discussed by Gillingham is whether consumers
actually respond the same way to an increase in the cost of driving
compared to a decrease in the cost of driving. There is some evidence
in the literature that consumers are more responsive to an increase in
prices than to a decrease in prices.537 538 539 Furthermore,
it is also possible that consumers respond more to a large shock than a
small, gradual change in prices. Since these proposed standards would
decrease the cost of driving gradually over time, it is possible that
the rebound effect would be much smaller than some of the estimates
included in the historical literature. More research in this area is
also important, and EPA invites comment and data on this aspect of the
rebound effect.
---------------------------------------------------------------------------
\537\ Dargay, J.M., Gately, D., 1997. ``The demand for
transportation fuels: imperfect price-reversibility?''
Transportation Research Part B 31(1). (Docket EPA-HQ-OAR-2010-0799).
\538\ Dermot Gately, 1993. ``The Imperfect Price-Reversibility
of World Oil Demand,'' The Energy Journal, International Association
for Energy Economics, vol. 14(4), pages 163-182. (Docket EPA-HQ-OAR-
2010-0799).
\539\ Sentenac-Chemin, E. (2010) Is the price effect on fuel
consumption symmetric? Some evidence from an empirical study, Energy
Policy (2010), doi:10.1016/j.enpol.2010.07.016 (Docket EPA-HQ-OAR-
2010-0799).
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Finally, for purposes of analyzing the proposed standards, EPA
assumes the rebound effect will be the same whether a consumer is
driving a conventional gasoline vehicle or a vehicle powered by grid
electricity. We are not aware of any research that has examined
consumer responses to changes in the cost per mile of driving that
result from driving an electric-powered vehicle instead of a
conventional gasoline vehicle. EPA requests comment and data on this
topic.
Chapter 4.2.5 of the Joint TSD reviews the relevant literature and
discusses in more depth the reasoning for the rebound value used here.
The rebound effect is also discussed in Section II.E of the preamble.
While EPA has used a weight of evidence approach for determining that
10 percent is a reasonable value to use for the rebound effect, EPA
requests comments on this and alternative methodologies for estimating
the rebound effect over the period that our proposed standards would go
into effect. EPA also invites the submission of new data regarding
estimates of the rebound effect. We also discuss two approaches for
modeling the rebound effect in Chapter 4 of the DRIA; we request
comment on these modeling approaches.
5. CO2 Emission Reduction Benefits
EPA has assigned a dollar value to reductions in CO2
emissions using global estimates of the social cost of carbon (SCC).
The SCC is an estimate of the monetized damages associated with an
incremental increase in carbon emissions in a given year. It is
intended to include (but is not limited to) changes in net agricultural
productivity, human health, property damages from increased flood risk,
and the value of ecosystem services due to climate change. The SCC
estimates used in this analysis were developed through an interagency
process that included EPA, DOT/NHTSA, and other executive branch
entities, and concluded in February 2010. We first used these SCC
estimates in the benefits analysis for the 2012-2016 light-duty GHG
rulemaking; see 75 FR at 25520. We have continued to use these
estimates in other rulemaking analyses, including the heavy-duty GHG
rulemaking; see 76 FR at 57332. The SCC Technical Support Document (SCC
TSD) provides a complete discussion of the methods used to develop
these SCC estimates.\540\
---------------------------------------------------------------------------
\540\ Docket ID EPA-HQ-OAR-2010-0799, Technical Support
Document: Social Cost of Carbon for Regulatory Impact Analysis Under
Executive Order 12866, Interagency Working Group on Social Cost of
Carbon, with participation by Council of Economic Advisers, Council
on Environmental Quality, Department of Agriculture, Department of
Commerce, Department of Energy, Department of Transportation,
Environmental Protection Agency, National Economic Council, Office
of Energy and Climate Change, Office of Management and Budget,
Office of Science and Technology Policy, and Department of Treasury
(February 2010). Also available at http://epa.gov/otaq/climate/regulations.htm.
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[[Page 75127]]
The interagency group selected four SCC values for use in
regulatory analyses, which we have applied in this analysis: $5, $22,
$36, and $67 per metric ton of CO2 emissions in 2010, in
2009 dollars.541 542 The first three values are based on the
average SCC from three integrated assessment models, at discount rates
of 5, 3, and 2.5 percent, respectively. SCCs at several discount rates
are included because the literature shows that the SCC is quite
sensitive to assumptions about the discount rate, and because no
consensus exists on the appropriate rate to use in an intergenerational
context. The fourth value is the 95th percentile of the SCC from all
three models at a 3 percent discount rate. It is included to represent
higher-than-expected impacts from temperature change further out in the
tails of the SCC distribution. Low probability, high impact events are
incorporated into all of the SCC values through explicit consideration
of their effects in two of the three models as well as the use of a
probability density function for equilibrium climate sensitivity.
Treating climate sensitivity probabilistically results in more high
temperature outcomes, which in turn lead to higher projections of
damages.
---------------------------------------------------------------------------
\541\ The interagency group decided that these estimates apply
only to CO2 emissions. Given that warming profiles and
impacts other than temperature change (e.g., ocean acidification)
vary across GHGs, the group concluded ``transforming gases into
CO2-equivalents using GWP, and then multiplying the
carbon-equivalents by the SCC, would not result in accurate
estimates of the social costs of non-CO2 gases'' (SCC
TSD, pg 13).
\542\ The SCC estimates were converted from 2007 dollars to 2008
dollars using a GDP price deflator (1.021) and again to 2009 dollars
using a GDP price deflator (1.009) obtained from the Bureau of
Economic Analysis, National Income and Product Accounts Table 1.1.4,
Prices Indexes for Gross Domestic Product.
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The SCC increases over time because future emissions are expected
to produce larger incremental damages as physical and economic systems
become more stressed in response to greater climatic change. Note that
the interagency group estimated the growth rate of the SCC directly
using the three integrated assessment models rather than assuming a
constant annual growth rate. This helps to ensure that the estimates
are internally consistent with other modeling assumptions. Table III-70
presents the SCC estimates used in this analysis.
When attempting to assess the incremental economic impacts of
carbon dioxide emissions, the analyst faces a number of serious
challenges. A recent report from the National Academies of Science
points out that any assessment will suffer from uncertainty,
speculation, and lack of information about (1) Future emissions of
greenhouse gases, (2) the effects of past and future emissions on the
climate system, (3) the impact of changes in climate on the physical
and biological environment, and (4) the translation of these
environmental impacts into economic damages.\543\ As a result, any
effort to quantify and monetize the harms associated with climate
change will raise serious questions of science, economics, and ethics
and should be viewed as provisional.
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\543\ National Research Council (2009). Hidden Costs of Energy:
Unpriced Consequences of Energy Production and Use. National
Academies Press. See docket ID EPA-HQ-OAR-2010-0799.
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The interagency group noted a number of limitations to the SCC
analysis, including the incomplete way in which the integrated
assessment models capture catastrophic and non-catastrophic impacts,
their incomplete treatment of adaptation and technological change,
uncertainty in the extrapolation of damages to high temperatures, and
assumptions regarding risk aversion. The limited amount of research
linking climate impacts to economic damages makes the interagency
modeling exercise even more difficult. The interagency group hopes that
over time researchers and modelers will work to fill these gaps and
that the SCC estimates used for regulatory analysis by the Federal
government will continue to evolve with improvements in modeling.
Another limitation of the GHG benefits analysis in this proposed
rule is that it does not monetize the impacts associated with the non-
CO2 GHG reductions expected under the proposed standards (in
this case, nitrous oxides, methane, and hydorfluorocarbons). The
interagency group did not estimate the social costs of non-
CO2 GHG emissions when it developed the current social cost
of CO2 values. EPA recently requested comment on a
methodology to estimate the benefits associated with non-CO2
GHG reductions under the proposed New Source Performance Standards
(NSPS) for oil and gas exploration (76 FR at 52792). Referred to as the
``global warming potential (GWP) approach,'' the calculation uses the
GWP of the non-CO2 gas to estimate CO2
equivalents and then multiplies these CO2 equivalent
emission reductions by the social cost of CO2.
EPA presented and requested comment on the GWP approach in the NSPS
proposal as an interim method to produce estimates of the social cost
of methane until the Administration develops such values. Similarly, we
request comments in this proposed rulemaking on using the GWPs as an
interim approach and more broadly about appropriate methods to monetize
the climate benefits of non-CO2 GHG reductions.
In addition, the U.S. government intends to revise the SCC
estimates, taking into account new research findings that were not
included in the first round, and has set a preliminary goal of
revisiting the SCC values in the next few years or at such time as
substantially updated models become available, and to continue to
support research in this area. In particular, DOE and EPA hosted a
series of workshops to help motivate and inform this process.\544\ The
first workshop focused on conceptual and methodological issues related
to integrated assessment modeling and valuing climate change impacts,
along with methods of incorporating these estimates into policy
analysis.
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\544\ Improving the Assessment and Valuation of Climate Change
Impacts for Policy and Regulatory Analysis, held November 18-19,
2010 and January 27-28, 2011. Materials available at: http://yosemite.epa.gov/ee/epa/eerm.nsf/vwRepNumLookup/EE-0564?OpenDocument
and http://yosemite.epa.gov/ee/epa/eerm.nsf/vwRepNumLookup/EE-0566?OpenDocument. See also Docket ID EPA-HQ-OAR-2010-0799.
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Applying the global SCC estimates, shown in Table III-70, to the
estimated reductions in CO2 emissions under the proposed
standards, we estimate the dollar value of the GHG related benefits for
each analysis year. For internal consistency, the annual benefits are
discounted back to net present value terms using the same discount rate
as each SCC estimate (i.e., 5%, 3%, and 2.5%) rather than 3% and
7%.\545\ These estimates are provided in Table III-71.
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\545\ It is possible that other benefits or costs of final
regulations unrelated to CO2 emissions will be discounted
at rates that differ from those used to develop the SCC estimates.
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6. Non-Greenhouse Gas Health and Environmental Impacts
This section presents EPA's analysis of the non-GHG health and
environmental impacts that can be expected to occur as a result of the
proposed 2017-2025 light-duty vehicle GHG standards. CO2
emissions are predominantly the byproduct of fossil fuel combustion
processes that also produce criteria and hazardous air pollutants. The
vehicles that are subject to the proposed standards are also
significant sources of mobile source air pollution such as direct PM,
NOX, VOCs and air toxics. The proposed standards would
affect exhaust emissions of these pollutants from vehicles. They would
also affect emissions from upstream sources related to changes in fuel
consumption. Changes in ambient
[[Page 75130]]
ozone, PM2.5, and air toxics that would result from the
proposed standards are expected to affect human health in the form of
premature deaths and other serious human health effects, as well as
other important public health and welfare effects.
It is important to quantify the health and environmental impacts
associated with the proposed standard because a failure to adequately
consider these ancillary co-pollutant impacts could lead to an
incorrect assessment of their net costs and benefits. Moreover, co-
pollutant impacts tend to accrue in the near term, while any effects
from reduced climate change mostly accrue over a time frame of several
decades or longer.
EPA typically quantifies and monetizes the health and environmental
impacts related to both PM and ozone in its regulatory impact analyses
(RIAs) when possible. However, EPA was unable to do so in time for this
proposal. EPA attempts to make emissions and air quality modeling
decisions early in the analytical process so that we can complete the
photochemical air quality modeling and use that data to inform the
health and environmental impacts analysis. Resource and time
constraints precluded the Agency from completing this work in time for
the proposal. Instead, EPA is using PM-related benefits-per-ton values
as an interim approach to estimating the PM-related benefits of the
proposal. EPA also provides a characterization of the health and
environmental impacts that will be quantified and monetized for the
final rulemaking.
This section is split into two sub-sections: The first presents the
PM-related benefits-per-ton values used to monetize the PM-related co-
benefits associated with the proposal; the second explains what PM- and
ozone-related health and environmental impacts EPA will quantify and
monetize in the analysis for the final rule. EPA bases its analyses on
peer-reviewed studies of air quality and health and welfare effects and
peer-reviewed studies of the monetary values of public health and
welfare improvements, and is generally consistent with benefits
analyses performed for the analysis of the final Cross-State Air
Pollution Rule,\546\ the final 2014-2018 MY Heavy-Duty Vehicle
Greenhouse Gas Rule,\547\ and the final Portland Cement National
Emissions Standards for Hazardous Air Pollutants (NESHAP) RIA.\548\
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\546\ Final Cross-State Air Pollution Rule. (76 FR 48208, August
8, 2011).
\547\ U.S. Environmental Protection Agency. (2011). Final
Rulemaking to Establish Heavy-Duty Vehicle Greenhouse Gas Emission
Standards and Corporate Average Fuel Economy Standards: Regulatory
Impact Analysis, Assessment and Standards Division, Office of
Transportation and Air Quality, EPA-420-R-10-009, July 2011.
Available on the internet: http://www.epa.gov/otaq/climate/regulations/420r10009.pdf.
\548\ U.S. Environmental Protection Agency (U.S. EPA). 2010.
Regulatory Impact Analysis: National Emission Standards for
Hazardous Air Pollutants from the Portland Cement Manufacturing
Industry. Office of Air Quality Planning and Standards, Research
Triangle Park, NC. Augues. Available on the Internet at < http://www.epa.gov/ttn/ecas/regdata/RIAs/portlandcementfinalria.pdf >. EPA-
HQ-OAR-2009-0472-0241.
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Though EPA is characterizing the changes in emissions associated
with toxic pollutants, we will not be able to quantify or monetize the
human health effects associated with air toxic pollutants for either
the proposal or the final rule analyses. Please refer to Section III.G
for more information about the air toxics emissions impacts associated
with the proposed standards.
a. Economic Value of Reductions in Criteria Pollutants
As described in Section III.G, the proposed standards would reduce
emissions of several criteria and toxic pollutants and precursors. In
this analysis, EPA estimates the economic value of the human health
benefits associated with reducing PM2.5 exposure. Due to
analytical limitations, this analysis does not estimate benefits
related to other criteria pollutants (such as ozone, NO2 or
SO2) or toxic pollutants, nor does it monetize all of the
potential health and welfare effects associated with PM2.5.
This analysis uses a ``benefit-per-ton'' method to estimate a
selected suite of PM2.5-related health benefits described
below. These PM2.5 benefit-per-ton estimates provide the
total monetized human health benefits (the sum of premature mortality
and premature morbidity) of reducing one ton of directly emitted
PM2.5, or its precursors (such as NOX,
SOX, and VOCs), from a specified source. Ideally, the human
health benefits would be estimated based on changes in ambient
PM2.5 as determined by full-scale air quality modeling.
However, this modeling was not possible in the timeframe for this
proposal.
The dollar-per-ton estimates used in this analysis are provided in
Table III-72. In the summary of costs and benefits, Section III.H.9 of
this preamble, EPA presents the monetized value of PM-related
improvements associated with the proposal.
[[Page 75131]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.136
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\a\ The benefit-per-ton estimates presented in this table are
based on an estimate of premature mortality derived from the ACS
study (Pope et al., 2002). If the benefit-per-ton estimates were
based on the Six-Cities study (Laden et al., 2006), the values would
be approximately two-and-a-half times larger. See below for a
description of these studies.
\b\ The benefit-per-ton estimates presented in this table assume
either a 3 percent or 7 percent discount rate in the valuation of
premature mortality to account for a twenty-year segmented cessation
lag.
\c\ Benefit-per-ton values were estimated for the years 2015,
2020, and 2030. For intermediate years, such as 2017 (the year the
standards begin), we interpolated exponentially. For years beyond
2030 (including 2040), EPA and NHTSA extrapolated exponentially
based on the growth between 2020 and 2030.
\d\ Note that the benefit-per-ton value for SOx is based on the
value for Stationary (Non-EGU) sources; no SOx value was estimated
for mobile sources. The benefit-per-ton value for VOCs was estimated
across all sources.
\e\ Non-EGU denotes stationary sources of emissions other than
electric generating units.
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[[Page 75132]]
The benefit per-ton technique has been used in previous analyses,
including EPA's 2012-2016 Light-Duty Vehicle Greenhouse Gas
Rule,549 550 and the Portland Cement National Emissions
Standards for Hazardous Air Pollutants (NESHAP) RIA.\551\ Table III-73
shows the quantified and unquantified PM2.5-related co-
benefits captured in those benefit-per-ton estimates.
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\549\ U.S. Environmental Protection Agency (U.S. EPA), 2010.
Regulatory Impact Analysis, Final Rulemaking to Establish Light-Duty
Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel
Economy Standards. Office of Transportation and Air Quality. April.
Available at http://www.epa.gov/otaq/climate/regulations/420r10009.pdf. EPA-420-R-10-009.
\550\ U.S. Environmental Protection Agency (U.S. EPA). 2008.
Regulatory Impact Analysis, 2008 National Ambient Air Quality
Standards for Ground-level Ozone, Chapter 6. Office of Air Quality
Planning and Standards, Research Triangle Park, NC. March. Available
at http://www.epa.gov/ttn/ecas/regdata/RIAs/6-ozoneriachapter6.pdf.
\551\ U.S. Environmental Protection Agency (U.S. EPA). 2010.
Regulatory Impact Analysis: National Emission Standards for
Hazardous Air Pollutants from the Portland Cement Manufacturing
Industry. Office of Air Quality Planning and Standards, Research
Triangle Park, NC. Augues. Available on the Internet at < http://www.epa.gov/ttn/ecas/regdata/RIAs/portlandcementfinalria.pdf. EPA-
HQ-OAR-2009-0472-0241
[GRAPHIC] [TIFF OMITTED] TP01DE11.137
Consistent with the cost-benefit analysis that accompanied the
NO2 NAAQS,552 553 the benefits estimates utilize
the concentration-response functions as reported in the epidemiology
literature. To calculate the total monetized impacts associated with
quantified health impacts, EPA applies values derived from a number of
sources. For premature mortality, EPA applies a value of a statistical
life (VSL) derived from the mortality valuation literature. For certain
health impacts, such as chronic bronchitis and a number of respiratory-
related ailments, EPA applies willingness-to-pay estimates derived from
the valuation literature. For the remaining health impacts, EPA applies
values derived from current cost-of-illness and/or wage estimates.
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\552\ Although we summarize the main issues in this chapter, we
encourage interested readers to see benefits chapter of the RIA that
accompanied the NO2 NAAQS for a more detailed description
of recent changes to the PM benefits presentation and preference for
the no-threshold model. Note that the cost-benefit analysis was
prepared solely for purposes of fulfilling analysis requirements
under Executive Order 12866 and was not considered, or otherwise
played any part, in the decision to revise the NO2 NAAQS.
\553\ U.S. Environmental Protection Agency (U.S. EPA). 2010.
Final NO2 NAAQS Regulatory Impact Analysis (RIA). Office
of Air Quality Planning and Standards, Research Triangle Park, NC.
April. Available on the Internet at http://www.epa.gov/ttn/ecas/regdata/RIAs/FinalNO2RIAfulldocument.pdf. Accessed March 15, 2010.
EPA-HQ-OAR-2009-0472-0237 U.S. Environmental Protection Agency (U.S.
EPA). 2009.
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A more detailed description of the benefit-per-ton estimates is
provided in Chapter 4 of the Draft Joint TSD that accompanies this
rulemaking. Readers interested in reviewing the complete methodology
for creating the benefit-per-ton estimates used in this analysis can
consult the Technical Support
[[Page 75133]]
Document (TSD) \554\ accompanying the recent final ozone NAAQS RIA
(U.S. EPA, 2008).\555\ Readers can also refer to Fann et al. (2009)
\556\ for a detailed description of the benefit-per-ton
methodology.\557\
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\554\ U.S. Environmental Protection Agency (U.S. EPA). 2008.
Technical Support Document: Calculating Benefit Per-Ton Estimates,
Ozone NAAQS Docket EPA-HQ-OAR-2007-0225-0284. Office of Air
Quality Planning and Standards, Research Triangle Park, NC. March.
Available on the Internet at <http://www.regulations.gov>.
\555\ U.S. Environmental Protection Agency (U.S. EPA). 2008.
Regulatory Impact Analysis, 2008 National Ambient Air Quality
Standards for Ground-level Ozone, Chapter 6. Office of Air Quality
Planning and Standards, Research Triangle Park, NC. March. Available
at <http://www.epa.gov/ttn/ecas/regdata/RIAs/6-ozoneriachapter6.pdf>. Note that the cost-benefit analysis was
prepared solely for purposes of fulfilling analysis requirements
under Executive Order 12866 and was not considered, or otherwise
played any part, in the decision to revise the Ozone NAAQS.
\556\ Fann, N. et al. (2009). The influence of location, source,
and emission type in estimates of the human health benefits of
reducing a ton of air pollution. Air Qual Atmos Health. Published
online: 09 June, 2009.
\557\ The values included in this report are different from
those presented in the article cited above. Benefits methods change
to reflect new information and evaluation of the science. Since
publication of the June 2009 article, EPA has made two significant
changes to its benefits methods: (1) We no longer assume that a
threshold exists in PM-related models of health impacts; and (2) We
have revised the Value of a Statistical Life to equal $6.3 million
(year 2000$), up from an estimate of $5.5 million (year 2000$) used
in the June 2009 report. Please refer to the following Web site for
updates to the dollar-per-ton estimates: http://www.epa.gov/air/benmap/bpt.html.
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As described in the documentation for the benefit per-ton estimates
cited above, national per-ton estimates were developed for selected
pollutant/source category combinations. The per-ton values calculated
therefore apply only to tons reduced from those specific pollutant/
source combinations (e.g., NO2 emitted from mobile sources;
direct PM emitted from stationary sources). Our estimate of
PM2.5 benefits is therefore based on the total direct
PM2.5 and PM-related precursor emissions controlled by
sector and multiplied by each per-ton value.
As Table III-72 indicates, EPA projects that the per-ton values for
reducing emissions of non-GHG pollutants from both vehicle use and
stationary sources such as fuel refineries and storage facilities will
increase over time.\558\ These projected increases reflect rising
income levels, which are assumed to increase affected individuals'
willingness to pay for reduced exposure to health threats from air
pollution.\559\ They also reflect future population growth and
increased life expectancy, which expands the size of the population
exposed to air pollution in both urban and rural areas, especially in
older age groups with the highest mortality risk.\560\
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\558\ As we discuss in the emissions chapter of EPA's DRIA
(Chapter 4), the rule would yield emission reductions from upstream
refining and fuel distribution due to decreased petroleum
consumption.
\559\ The issue is discussed in more detail in the PM NAAQS RIA
from 2006. See U.S. Environmental Protection Agency. 2006. Final
Regulatory Impact Analysis (RIA) for the Proposed National Ambient
Air Quality Standards for Particulate Matter. Prepared by: Office of
Air and Radiation. October 2006. Available at http://www.epa.gov/ttn/ecas/ria.html.
\560\ For more information about EPA's population projections,
please refer to the following: http://www.epa.gov/air/benmap/models/BenMAPManualAppendicesAugust2010.pdf (See Appendix K).
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The benefit-per-ton estimates are subject to a number of
assumptions and uncertainties:
They do not reflect local variability in population
density, meteorology, exposure, baseline health incidence rates, or
other local factors that might lead to an overestimate or underestimate
of the actual benefits of controlling fine particulates. EPA will
conduct full-scale air quality modeling for the final rulemaking in an
effort to capture this variability.
This analysis assumes that all fine particles, regardless
of their chemical composition, are equally potent in causing premature
mortality. This is an important assumption, because PM2.5
produced via transported precursors emitted from stationary sources may
differ significantly from direct PM2.5 released from diesel
engines and other industrial sources, but no clear scientific grounds
exist for supporting differential effects estimates by particle type.
This analysis assumes that the health impact function for
fine particles is linear within the range of ambient concentrations
under consideration. Thus, the estimates include health benefits from
reducing fine particles in areas with varied concentrations of
PM2.5, including both regions that are in attainment with
fine particle standard and those that do not meet the standard down to
the lowest modeled concentrations.
There are several health benefits categories that EPA was
unable to quantify due to limitations associated with using benefits-
per-ton estimates, several of which could be substantial. Because the
NOX and VOC emission reductions associated with this
proposal are also precursors to ozone, reductions in NOX and
VOC would also reduce ozone formation and the health effects associated
with ozone exposure. Unfortunately, ozone-related benefits-per-ton
estimates do not exist due to issues associated with the complexity of
the atmospheric air chemistry and nonlinearities associated with ozone
formation. The PM-related benefits-per-ton estimates also do not
include any human welfare or ecological benefits. Please refer to
Chapter 6.3 of the DRIA that accompanies this proposal for a
description of the agecy's plan to quantify and monetize the PM- and
ozone-related health impacts for the FRM and a description of the
unquantified co-pollutant benefits associated with this rulemaking.
There are many uncertainties associated with the health
impact functions used in this modeling effort. These include: Within-
study variability (the precision with which a given study estimates the
relationship between air quality changes and health effects); across-
study variation (different published studies of the same pollutant/
health effect relationship typically do not report identical findings
and in some instances the differences are substantial); the application
of concentration-response functions nationwide (does not account for
any relationship between region and health effect, to the extent that
such a relationship exists); extrapolation of impact functions across
population (we assumed that certain health impact functions applied to
age ranges broader than that considered in the original epidemiological
study); and various uncertainties in the concentration-response
function, including causality and thresholds. These uncertainties may
under- or over-estimate benefits.
EPA has investigated methods to characterize uncertainty
in the relationship between PM2.5 exposure and premature
mortality. EPA's final PM2.5 NAAQS analysis provides a more
complete picture about the overall uncertainty in PM2.5
benefits estimates. For more information, please consult the
PM2.5 NAAQS RIA (Table 5.5).\561\
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\561\ U.S. Environmental Protection Agency. October 2006. Final
Regulatory Impact Analysis (RIA) for the Final National Ambient Air
Quality Standards for Particulate Matter. Prepared by: Office of Air
and Radiation.
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The benefit-per-ton estimates used in this analysis
incorporate projections of key variables, including atmospheric
conditions, source level emissions, population, health baselines and
incomes, technology. These projections introduce some uncertainties to
the benefit per ton estimates.
As described above, using the benefit-per-ton value
derived from the ACS study (Pope et al., 2002) alone provides an
incomplete characterization of PM2.5 benefits. When placed
in the
[[Page 75134]]
context of the Expert Elicitation results, this estimate falls toward
the lower end of the distribution. By contrast, the estimated
PM2.5 benefits using the coefficient reported by Laden in
that author's reanalysis of the Harvard Six Cities cohort fall toward
the upper end of the Expert Elicitation distribution results.
As mentioned above, emissions changes and benefits-per-ton
estimates alone are not a good indication of local or regional air
quality and health impacts, as there may be localized impacts
associated with the proposed rulemaking. Additionally, the atmospheric
chemistry related to ambient concentrations of PM2.5, ozone
and air toxics is very complex. Full-scale photochemical modeling is
therefore necessary to provide the needed spatial and temporal detail
to more completely and accurately estimate the changes in ambient
levels of these pollutants and their associated health and welfare
impacts. As discussed above, timing and resource constraints precluded
EPA from conducting a full-scale photochemical air quality modeling
analysis in time for the NPRM. For the final rule, however, a national-
scale air quality modeling analysis will be performed to analyze the
impacts of the standards on PM2.5, ozone, and selected air
toxics. The benefits analysis plan for the final rulemaking is
discussed in the next section.
b. Human Health and Environmental Benefits for the Final Rule
i. Human Health and Environmental Impacts
To model the ozone and PM air quality benefits of the final rule,
EPA will use the Community Multiscale Air Quality (CMAQ) model (see
Section III.G.5. for a description of the CMAQ model). The modeled
ambient air quality data will serve as an input to the Environmental
Benefits Mapping and Analysis Program (BenMAP).\562\ BenMAP is a
computer program developed by EPA that integrates a number of the
modeling elements used in previous RIAs (e.g., interpolation functions,
population projections, health impact functions, valuation functions,
analysis and pooling methods) to translate modeled air concentration
estimates into health effects incidence estimates and monetized
benefits estimates.
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\562\ Information on BenMAP, including downloads of the
software, can be found at http://www.epa.gov/ttn/ecas/benmodels.html.
---------------------------------------------------------------------------
Chapter 6.3 in the DRIA that accompanies this proposal lists the
co-pollutant health effect concentration-response functions EPA will
use to quantify the non-GHG incidence impacts associated with the final
light-duty vehicles standard. These include PM- and ozone-related
premature mortality, chronic bronchitis, nonfatal heart attacks,
hospital admissions (respiratory and cardiovascular), emergency room
visits, acute bronchitis, minor restricted activity days, and days of
work and school lost.
ii. Monetized Impacts
To calculate the total monetized impacts associated with quantified
health impacts, EPA applies values derived from a number of sources.
For premature mortality, EPA applies a value of a statistical life
(VSL) derived from the mortality valuation literature. For certain
health impacts, such as chronic bronchitis and a number of respiratory-
related ailments, EPA applies willingness-to-pay estimates derived from
the valuation literature. For the remaining health impacts, EPA applies
values derived from current cost-of-illness and/or wage estimates.
Chapter 6.3 in the DRIA that accompanies this proposal presents the
monetary values EPA will apply to changes in the incidence of health
and welfare effects associated with reductions in non-GHG pollutants
that will occur when these GHG control strategies are finalized.
iii. Other Unquantified Health and Environmental Impacts
In addition to the co-pollutant health and environmental impacts
EPA will quantify for the analysis of the final standard, there are a
number of other health and human welfare endpoints that EPA will not be
able to quantify or monetize because of current limitations in the
methods or available data. These impacts are associated with emissions
of air toxics (including benzene, 1,3-butadiene, formaldehyde,
acetaldehyde, acrolein, and ethanol), ambient ozone, and ambient
PM2.5 exposures. Chapter 6.3 of the DRIA lists these
unquantified health and environmental impacts.
While there will be impacts associated with air toxic pollutant
emission changes that result from the final standard, EPA will not
attempt to monetize those impacts. This is primarily because currently
available tools and methods to assess air toxics risk from mobile
sources at the national scale are not adequate for extrapolation to
incidence estimations or benefits assessment. The best suite of tools
and methods currently available for assessment at the national scale
are those used in the National-Scale Air Toxics Assessment (NATA). The
EPA Science Advisory Board specifically commented in their review of
the 1996 NATA that these tools were not yet ready for use in a
national-scale benefits analysis, because they did not consider the
full distribution of exposure and risk, or address sub-chronic health
effects.\563\ While EPA has since improved the tools, there remain
critical limitations for estimating incidence and assessing benefits of
reducing mobile source air toxics. EPA continues to work to address
these limitations; however, EPA does not anticipate having methods and
tools available for national-scale application in time for the analysis
of the final rules.\564\
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\563\ Science Advisory Board. 2001. NATA--Evaluating the
National-Scale Air Toxics Assessment for 1996--an SAB Advisory.
http://www.epa.gov/ttn/atw/sab/sabrev.html.
\564\ In April, 2009, EPA hosted a workshop on estimating the
benefits of reducing hazardous air pollutants. This workshop built
upon the work accomplished in the June 2000 Science Advisory Board/
EPA Workshop on the Benefits of Reductions in Exposure to Hazardous
Air Pollutants, which generated thoughtful discussion on approaches
to estimating human health benefits from reductions in air toxics
exposure, but no consensus was reached on methods that could be
implemented in the near term for a broad selection of air toxics.
Please visit http://epa.gov/air/toxicair/2009workshop.html for more
information about the workshop and its associated materials.
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7. Energy Security Impacts
The proposed GHG standards require improvements in light-duty
vehicle fuel efficiency which, in turn, will reduce overall fuel
consumption and help to reduce U.S. petroleum imports. Reducing U.S.
petroleum imports lowers both the financial and strategic risks caused
by potential sudden disruptions in the supply of imported petroleum to
the U.S. The economic value of reductions in these risks provides a
measure of improved U.S. energy security. This section summarizes EPA's
estimates of U.S. oil import reductions and energy security benefits
from this proposal. Additional discussion of this issue can be found in
Chapter 4.2.8 of the Joint TSD.
a. Implications of Reduced Petroleum Use on U.S. Imports
In 2010, U.S. petroleum import expenditures represented 14 percent
of total U.S. imports of all goods and services.\565\ These
expenditures rose to 18 percent by April of 2011.\566\ In 2010, the
United States imported 49 percent of the petroleum it consumed,\567\
and the
[[Page 75135]]
transportation sector accounted for 71 percent of total U.S. petroleum
consumption. This compares to approximately 37 percent of total U.S.
petroleum supplied by imports and 55 percent of U.S. petroleum
consumption in the transportation sector in 1975.\568\
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\565\ http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WTTIMUS2&f=W.
\566\ http://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_ep00_im0_mbblpd_a.htm.
\567\ http://www.eia.gov/dnav/pet/pet_pri_rac2_dcu_nus_m.htm.
\568\ Source: U.S. Department of Energy, Annual Energy Review
2008, Report No. DOE/EIA-0384(2008), Tables 5.1 and 5.13c, June 26,
2009.
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Requiring vehicle technology that reduces GHGs and fuel consumption
in light-duty vehicles is expected to lower U.S. oil imports. EPA's
estimates of reductions in fuel consumption resulting from the proposed
standards are discussed in Section III.H.3 above, and in EPA's draft
RIA.\569\
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\569\ Due to timing constraints, the energy security premiums
($/gallon) were derived using preliminary estimates of the gasoline
consumption reductions projected from this proposal. The energy
security benefits totals shown here were calculated with those $/
gallon values along with the final quantities of gasoline
consumption avoided. Relative to the preliminary gasoline
consumption reductions, the reductions presented in this proposal
are roughly 3% lower in total from 2017 through 2050.
---------------------------------------------------------------------------
The agencies conducted a detailed analysis of future changes in
U.S. transportation fuel consumption, petroleum imports, and domestic
fuel refining projected to occur under alternative economic growth and
oil price scenarios reported by the EIA in its Annual Energy Outlook
2011.\570\ On the basis of this analysis, we estimate that
approximately 50 percent of the reduction in fuel consumption resulting
from adopting improved GHG emission and fuel efficiency standards is
likely to be reflected in reduced U.S. imports of refined fuel, while
the remaining 50 percent is expected to be reflected in reduced
domestic fuel refining. Of this latter figure, 90 percent is
anticipated to reduce U.S. imports of crude petroleum for use as a
refinery feedstock, while the remaining 10 percent is expected to
reduce U.S. domestic production of crude petroleum. Thus, on balance,
each gallon of fuel saved as a consequence of the GHG and fuel
efficiency standards is anticipated to reduce total U.S. imports of
petroleum by 0.95 gallon.\571\ Table III-74 below compares EPA's
estimates of the reduction in imports of U.S. crude oil and petroleum-
based products from this program to projected total U.S. imports for
selected years.
---------------------------------------------------------------------------
\570\ Energy Information Administration, Annual Energy Outlook
2011, Reference Case and other scenarios, available at http://www.eia.gov/oiaf/aeo/tablebrowser/ (last accessed October 12, 2011).
\571\ This figure is calculated as 0.50 + 0.50*0.9 = 0.50 + 0.45
= 0.95.
[GRAPHIC] [TIFF OMITTED] TP01DE11.138
b. Energy Security Implications
In order to understand the energy security implications of reducing
U.S. petroleum imports, EPA worked with Oak Ridge National Laboratory
(ORNL), which has developed approaches for evaluating the economic
costs and energy security implications of oil use. The energy security
estimates provided below are based upon a methodology developed in a
peer-reviewed study entitled, The Energy Security Benefits of Reduced
Oil Use, 2006-2015, completed in March 2008. This study is included as
part of the docket for this proposal.572 573
---------------------------------------------------------------------------
\572\ Leiby, Paul N., Estimating the Energy Security Benefits of
Reduced U.S. Oil Imports, Oak Ridge National Laboratory, ORNL/TM-
2007/028, Final Report, 2008. (Docket EPA-HQ-OAR-2010-0162)
\573\ The ORNL study The Energy Security Benefits of Reduced Oil
Use, 2006-2015, completed in March 2008, is an updated version of
the approach used for estimating the energy security benefits of
U.S. oil import reductions developed in an ORNL 1997 Report by
Leiby, Paul N., Donald W. Jones, T. Randall Curlee, and Russell Lee,
entitled Oil Imports: An Assessment of Benefits and Costs. (Docket
EPA-HQ-OAR-2010-0162).
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[[Page 75136]]
When conducting its analysis, ORNL considered the full economic
cost of importing petroleum into the United States. The economic cost
of importing petroleum into the U.S. is defined to include two
components in addition to the purchase price of petroleum itself. These
are: (1) the higher costs for oil imports resulting from the effect of
increasing U.S. import demand on the world oil price and on the market
power of the Organization of the Petroleum Exporting Countries (i.e.,
the ``demand'' or ``monopsony'' costs); and (2) the risk of reductions
in U.S. economic output and disruption of the U.S. economy caused by
sudden disruptions in the supply of imported petroleum to the U.S.
(i.e., ``macroeconomic disruption/adjustment costs''). In its analysis
of energy security benefits from reducing U.S. petroleum imports,
however, the agencies included only the latter component (discussed
below).
ORNL's analysis of energy security benefits from reducing U.S. oil
imports did not include an estimate of potential reductions in costs
for maintaining a U.S. military presence to help secure stable oil
supply from potentially vulnerable regions of the world because
attributing military spending to particular missions or activities is
difficult. Attempts to attribute some share of U.S. military costs to
oil imports are further complicated by the need to estimate how those
costs vary with incremental variations in U.S. oil imports. Several
commenters for the 2012-2016 light-duty vehicle proposal recommended
that the agencies attempt to estimate the avoided U.S. military costs
associated with reductions in U.S. oil imports. The agencies request
comment on this issue, including whether there are new studies that
credibly estimate the military cost of securing stable oil supplies
and, if so, how should these new estimates be factored into this
proposal's energy security analysis. See Section 4.2.8 of the TSD for a
more detailed discussion of the national security implications of this
proposed rule.
For this action, ORNL estimated energy security premiums by
incorporating the most recently available AEO 2011 Reference Case oil
price forecasts and market trends. Energy security premiums for the
years 2020, 2030, 2035, 2040 and 2050 are presented in Table III-75 as
well as a breakdown of the components of the energy security premiums
for each of these years.\574\ The components of the energy security
premium and their values are discussed in detail in the Joint TSD
Chapter 4.2.8. The oil security premium rises over the future as a
result of changing factors such as the world oil price, global supply/
demand balances, U.S. oil imports and consumption, and U.S. GDP (the
size of economy at risk to oil shocks). The principal factor is
steadily rising oil prices.
---------------------------------------------------------------------------
\574\ AEO 2011 forecasts energy market trends and values only to
2035. The energy security premium estimates post-2035 were assumed
to be the 2035 estimate.
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[[Page 75137]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.139
The literature on energy security for the last two decades has
routinely combined the monopsony and the macroeconomic disruption
components when calculating the total value of the energy security
premium. However, in the context of using a global social cost of
carbon (SCC) value, the question arises: How should the energy security
premium be determined when a global perspective is taken? Monopsony
benefits represent avoided payments by the United States to oil
producers in foreign countries that result from a decrease in the world
oil price as the U.S. decreases its consumption of imported oil.
Although there is clearly a benefit to the U.S. when considered
from a domestic perspective, the decrease in price due to decreased
demand in the U.S. also represents a loss to other countries. Given the
redistributive nature of this monopsony effect from a global
perspective, it is excluded in the energy security benefits
calculations for this proposal. In contrast, the other portion of the
energy security premium, the U.S. macroeconomic disruption and
adjustment cost that arises from U.S. petroleum imports, does not have
offsetting impacts outside of the U.S., and, thus, is included in the
energy security benefits estimated for this proposal. To summarize, EPA
has included only the macroeconomic disruption portion of the energy
security benefits to estimate the monetary value of the total energy
security benefits of this program.
For this proposal, using EPA's fuel consumption analysis in
conjunction with ORNL's energy security premium
estimates,575 576 the agencies developed estimates of the
total energy security benefits for the years 2017 through 2050 as shown
in Table III-76.\577\
---------------------------------------------------------------------------
\575\ AEO 2011 forecasts energy market trends and values only to
2035. The energy security premium estimates post-2035 were assumed
to be the 2035 estimate.
\576\ Due to timing constraints, the energy security premiums
($/gallon) were derived using preliminary estimates of the gasoline
consumption reductions projected from this proposal. The energy
security benefits totals shown here were calculated with those $/
gallon values along with the final quantities of gasoline
consumption avoided. Relative to the preliminary gasoline
consumption reductions, the reductions presented in this proposal
are roughly 3% lower in total from 2017 through 2050.
\577\ Estimated reductions in U.S. imports of finished petroleum
products and crude oil are 95% of 54.2 million barrels (MMB) in
2020, 609 MMB in 2030, 962 MMB in 2040, and 1,140 MMB in 2050.
---------------------------------------------------------------------------
[[Page 75138]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.140
The energy security analysis conducted for this proposal estimates
that the world price of oil will fall modestly in response to lower
U.S. demand for refined fuel. One potential result of this decline in
the world price of oil would be an increase in the consumption of
petroleum products, particularly outside the U.S. In addition, other
fuels could be displaced from the increasing use of oil worldwide. For
example, if a decline in the world oil price causes an increase in oil
use in China, India, or another country's industrial sector, this
increase in oil consumption may displace natural gas usage.
Alternatively, the increased oil use could result in a decrease in coal
used to produce electricity. An increase in the consumption of
petroleum products, particularly outside the U.S., could lead to a
modest increase in emissions of greenhouse gases, criteria air
pollutants, and airborne toxics from their refining and use. However,
lower usage of, for example, displaced coal would result in a decrease
in greenhouse gas emissions. Therefore, any assessment of the impacts
on GHG emissions from a potential increase in world oil demand would
need to take into account the impacts on all portions of the global
energy sector. The agencies' analyses have not attempted to estimate
these effects.
[[Page 75139]]
Since EPA anticipates that more electric vehicles (EVs) and plug-in
hybrid electric vehicles (PHEVs) will penetrate the U.S. automobile
market over time as a result of this proposal, the Agency is
considering analyzing the energy security implications of these
vehicles and the fuels that they consume. These vehicles run on
electricity either in whole (EVs), or in part (PHEVs), which displaces
conventional transportation fuel such as gasoline and diesel. EPA does
not have sufficient information for this proposal to conduct an
analysis of the energy security implications of increased use of EVs/
PHEVs, but is considering how to conduct this type of analysis in the
future. The Agency recognizes that the fleet penetration of EV/PHEV's
will be relatively small in the time period of these standards (fewer
than 3% of new vehicles in 2025), but views establishing a framework
for examining the energy security implications of these vehicles as
important for longer-term analysis.
Key questions that arise with increased use of electricity in
vehicles in the U.S. include whether there is the potential for
disruptions in electricity supply in general, or more specifically,
from increased electrification of the U.S. vehicle fleet. Also, if
there is the potential for supply disruptions in electricity markets,
how likely would the disruptions be associated with disruptions in the
supply of oil? In addition, what is the overall expected impact, if
any, of additional EV/PHEV use on the stability and flexibility of fuel
and electricity markets? Finally, such analysis may also need to
consider the source of electricity used to power EVs/PHEVs. EPA
solicits comments on how to best conduct this type of analysis,
including any studies or research that have been published on these
issues.
8. Additional Impacts
There are other impacts associated with the CO2
emissions standards and associated reduced fuel consumption that vary
with miles driven. Lower fuel consumption would, presumably, result in
fewer trips to the filling station to refuel and, thus, time saved. The
rebound effect, discussed in detail in Section III.H.4.c, produces
additional benefits to vehicle owners in the form of consumer surplus
from the increase in vehicle-miles driven, but may also increase the
societal costs associated with traffic congestion, motor vehicle
crashes, and noise. These effects are likely to be relatively small in
comparison to the value of fuel saved as a result of the standards, but
they are nevertheless important to include. Table III-77 summarizes the
other economic impacts. Please refer to Preamble Section II.E and the
Joint TSD that accompanies this rule for more information about these
impacts and how EPA and NHTSA use them in their analyses.
[[Page 75140]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.141
9. Summary of Costs and Benefits
In this section, the agencies present a summary of costs, benefits,
and net benefits of the proposed program. Table III-78 shows the
estimated annual monetized costs of the proposed program for the
indicated calendar years. The table also shows the net present values
of those costs for the calendar years 2012-2050 using both 3 percent
and 7 percent discount rates.\578\ Table III-79 shows the undiscounted
annual monetized fuel savings of the proposed program. The table also
shows the net present values of those fuel savings for the same
calendar years using both 3 percent and 7 percent discount rates. In
this table, the aggregate value of fuel savings is calculated using
pre-tax fuel prices since savings in fuel taxes do not represent a
reduction in the value of economic resources utilized in producing and
consuming fuel. Note that the fuel savings shown here result from
reductions in fleet-wide fuel use. Thus, fuel savings grow over time as
an increasing fraction of the fleet meets the proposed standards.
---------------------------------------------------------------------------
\578\ For the estimation of the stream of costs and benefits, we
assume that after implementation of the proposed MY 2017-2025
standards, the 2025 standards apply to each year thereafter.
---------------------------------------------------------------------------
[[Page 75141]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.142
Table III-80 presents estimated annual monetized benefits for the
indicated calendar years. The table also shows the net present values
of those benefits for the calendar years 2012-2050 using both 3 percent
and 7 percent discount rates. The table shows the benefits of reduced
CO2 emissions--and consequently the annual quantified
benefits (i.e., total benefits)--for each of the four social cost of
carbon (SCC) values estimated by the interagency working group. As
discussed in the RIA Chapter 7.2, there are some limitations to the SCC
analysis, including the incomplete way in which the integrated
assessment models capture catastrophic and non-catastrophic impacts,
their incomplete treatment of adaptation and technological change,
uncertainty in the extrapolation of damages to high temperatures, and
assumptions regarding risk aversion.
In addition, these monetized GHG benefits exclude the value of net
reductions in non-CO2 GHG emissions (CH4,
N2O, HFC) expected under this action. Although EPA has not
monetized the benefits of reductions in non-CO2 GHGs, the
value of these reductions should not be interpreted as zero. Rather,
the net reductions in non-CO2 GHGs will contribute to this
program's climate benefits, as explained in Section III.H.5.
[[Page 75142]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.143
[[Page 75143]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.144
Table III-81 presents estimated annual net benefits for the
indicated calendar years. The table also shows the net present values
of those net benefits for the calendar years 2012-2050 using both 3
percent and 7 percent discount
[[Page 75144]]
rates. The table includes the benefits of reduced CO2
emissions (and consequently the annual net benefits) for each of the
four SCC values considered by EPA.
[GRAPHIC] [TIFF OMITTED] TP01DE11.145
EPA also conducted a separate analysis of the total benefits over
the model year lifetimes of the 2017 through 2025 model year vehicles.
In contrast to the calendar year analysis presented above in Table III-
78 through Table III-81, the model year lifetime analysis below shows
the impacts of the proposed program on vehicles produced during each of
the model years 2017 through 2025 over the course of their expected
lifetimes. The net societal benefits over the full lifetimes of
vehicles produced during each of the nine model years from 2017 through
2025 are shown in Table III-82 and Table III-83 at both 3 percent and 7
percent discount rates, respectively.
BILLING CODE 4910-59-P
[[Page 75145]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.146
[[Page 75146]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.147
[[Page 75147]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.148
[[Page 75148]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.149
BILLING CODE 4910-59-C
[[Page 75149]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.150
[[Page 75150]]
10. U.S. Vehicle Sales Impacts and Payback Period
a. Vehicle Sales Impacts and Payback Period
Predicting the effects of this rule on vehicles entails comparing
two effects. On the one hand, the vehicles designed to meet the
proposed standards will become more expensive, which would, by itself,
be expected to discourage sales. On the other hand, the vehicles will
have improved fuel economy and thus lower operating costs, producing
lower total costs over the life of vehicles, which makes them more
attractive to consumers. Which of these effects dominates for potential
vehicle buyers when they are considering a purchase will determine the
effect on sales. However, assessing the net effect of these two
competing effects is complex and uncertain, as it rests on how
consumers value fuel savings at the time of purchase and the extent to
which manufacturers and dealers reflect them in the purchase price. The
empirical literature does not provide clear evidence on whether
consumers fully consider the value of fuel savings at the time of
purchase. It also generally does not speak to the efficiency of
manufacturing and dealer pricing decisions. Thus, for the proposal we
do not provide quantified estimates of potential sales impacts. Rather,
we solicit comment on the issues raised here and on methods for
estimating the effect of this rule on vehicle sales.
For years, consumers have been gaining experience with the benefits
that accrue to them from owning and operating vehicles with greater
fuel efficiency. Many households already own vehicles with a fairly
wide range of fuel economy, and thus already have an opportunity to
learn about the value of fuel economy on their own. Among two-vehicle
households, for example, the least fuel-efficient vehicle averages just
over 22 mpg (EPA test rating), and the range between this and the fuel
economy of their other vehicle averages nearly 7 mpg. Among households
that own 3 or more vehicles, the typical range of the fuel economy they
offer is much wider. Consumer demand may have shifted towards such
vehicles, not only because of higher fuel prices but also if many
consumers are learning about the value of purchases based not only on
initial costs but also on the total cost of owning and operating a
vehicle over its lifetime. This type of learning should continue before
and during the model years affected by this rule, particularly given
the new fuel economy labels that clarify potential economic effects and
should therefore reinforce that learning.
Today's proposed rule, combined with the new and easier-to-
understand fuel economy label required to be on all new vehicles
beginning in 2012, may increase sales above baseline levels by
hastening this very type of consumer learning. As more consumers
experience, as a result of the rule, the savings in time and expense
from owning more fuel efficient vehicles, demand may shift yet further
in the direction of the vehicles mandated under the rule. This social
learning can take place both within and across households, as consumers
learn from one another.
First and most directly, the time and fuel savings associated with
operating more fuel efficient vehicles may be more salient to
individuals who own them, which might cause their subsequent purchase
decisions to shift closer to minimizing the total cost of ownership
over the lifetime of the vehicle.
Second, this appreciation may spread across households through word
of mouth and other forms of communications.
Third, as more motorists experience the time and fuel savings
associated with greater fuel efficiency, the price of used cars will
better reflect such efficiency, further reducing the cost of owning
more efficient vehicles for the buyers of new vehicles (since the
resale price will increase).
If these induced learning effects are strong, the rule could
potentially increase total vehicle sales over time. It is not possible
to quantify these learning effects years in advance and that effect may
be speeded or slowed by other factors that enter into a consumer's
valuation of fuel efficiency in selecting vehicles.
The possibility that the rule will (after a lag for consumer
learning) increase sales need not rest on the assumption that
automobile manufacturers are failing to pursue profitable opportunities
to supply the vehicles that consumers demand. In the absence of the
rule, no individual automobile manufacturer would find it profitable to
move toward the more efficient vehicles mandated under the rule. In
particular, no individual company can fully internalize the future
boost to demand resulting from the rule. If one company were to make
more efficient vehicles, counting on consumer learning to enhance
demand in the future, that company would capture only a fraction of the
extra sales so generated, because the learning at issue is not specific
to any one company's fleet. Many of the extra sales would accrue to
that company's competitors.
In other words, consumer learning about the benefits of fuel
efficient vehicles involves positive externalities (spillovers) from
one company to the others.\579\ These positive externalities may lead
to benefits for manufacturers as a whole. We emphasize that this
discussion has been tentative and qualified. To be sure, social
learning of related kinds has been identified in a number of
contexts.\580\ Comments are invited on the discussion offered here,
with particular reference to any relevant empirical findings.
---------------------------------------------------------------------------
\579\ Industrywide positive spillovers of this type are hardly
unique to this situation. In many industries, companies form trade
associations to promote industry-wide public goods. For example,
merchants in a given locale may band together to promote tourism in
that locale. Antitrust law recognizes that this type of coordination
can increase output.
\580\ See Hunt Allcott, Social Norms and Energy Conservation,
Journal of Public Economics (forthcoming 2011), available at http://web.mit.edu/allcott/www/Allcott%202011%20JPubEc%20-%20Social%20Norms%20and%20Energy%20Conservation.pdf; Christophe
Chamley, Rational Herds: Economic Models of Social Learning
(Cambridge, 2003).
---------------------------------------------------------------------------
In previous rulemakings, EPA and NHTSA conducted vehicle sales
analyses by comparing the up-front costs of the vehicles with the
present value of five years' worth of fuel savings. We assumed that the
costs for the fuel-saving technologies would be passed along fully to
vehicle buyers in the vehicle prices. The up-front vehicle costs were
adjusted to take into account several factors that would affect
consumer costs: The increased sales tax that consumers would pay, the
increase in insurance premiums, the increase in loan payments that
buyers would face, and a higher resale value, with all of these factors
due to the higher up-front cost of the vehicle. Those calculations
resulted in an adjusted increase in costs to consumers. We then assumed
that consumers considered the present value of five years of fuel
savings in their vehicle purchase, which is consistent with the length
of a typical new light-duty vehicle loan, and is similar to the average
time that a new vehicle purchaser holds onto the vehicle.\581\ The
present value of fuel savings was subtracted from technology costs to
get a net effect on vehicle cost of ownership. We then used a short-run
demand elasticity of -1 to convert a change in price into a change in
[[Page 75151]]
quantity demanded of vehicles.\582\ An elasticity of -1 means that a 1%
increase in price leads to a 1% reduction in quantity sold. In the
vehicle sales analyses, if five years of fuel savings outweighed the
adjusted technology costs, then vehicle sales were predicted to
increase; if the fuel savings were smaller than the adjusted technology
costs, sales would decrease, compared to a world without the standards.
---------------------------------------------------------------------------
\581\ In this proposal, the 5-year payback assumption
corresponds to an assumption that vehicle buyers take into account
between 30 and 50 percent of the present value of lifetime vehicle
fuel savings (with the variation depending on discount rate, model
year, and car vs. truck).
\582\ For a durable good such as an auto, the elasticity may be
smaller in the long run: Though people may be able to change the
timing of their purchase when price changes in the short run, they
must eventually make the investment. We request comment on whether
or when a long-run elasticity should be used for a rule that phases
in over time, as well as how to find good estimates for the long-run
elasticity.
---------------------------------------------------------------------------
We do not here present a vehicle sales analysis using this
approach. This rule takes effect for MY 2017-2025. In the intervening
years, it is possible that the assumptions underlying this analysis, as
well as market conditions, might change. Instead, we present a payback
period analysis to estimate the number of years of fuel savings needed
to recover the up-front costs of the new technologies. In other words,
the payback period identifies the break-even point for new vehicle
buyers.
A payback period analysis examines how long it would take for the
expected fuel savings to outweigh the increased cost of a new vehicle.
For example, a new 2025 MY vehicle is estimated to cost $1,946 more (on
average, and relative to the reference case vehicle) due to the
addition of new GHG reducing/fuel economy improving technology (see
Section III.D.6 for details on this cost estimate). This new technology
will result in lower fuel consumption and, therefore, savings in fuel
expenditures (see Section III.H.10 for details on fuel savings). But
how many months or years would pass before the fuel savings exceed the
upfront costs?
The payback analysis uses annual miles driven (vehicle miles
traveled, or VMT) and survival rates consistent with the emission and
benefits analyses presented in Chapter 4 of the Joint TSD. The control
case includes fuel savings associated with A/C controls. Not included
here are the likely A/C-related maintenance savings as discussed in
Chapter 2 of EPA's RIA. Further, this analysis does not include other
private impacts, such as reduced refueling events, or other societal
impacts, such as the potential rebound miles driven or the value of
driving those rebound miles, or noise, congestion and accidents, since
the focus is meant to be on those factors consumers think about most
while in the showroom considering a new car purchase. Car/truck fleet
weighting is handled as described in Chapter 1 of the Joint TSD. The
costs take into account the effects of the increased costs on sales
tax, insurance, resale value, and finance costs. More detail on this
analysis can be found in Chapter 5 of EPA's draft RIA.
Table III-84 presents results for MY 2021 because it is the last
year before the mid-term review impacts, if any, will take place, and
MY 2025 because it is the last year of the program. The payback period
in 2021 is shorter than that in 2025, because the technologies required
to meet the proposed MY 2021 standards are more cost-effective than
those for MY 2025. In all cases, the payback periods are less than 4
years.
[GRAPHIC] [TIFF OMITTED] TP01DE11.151
Most people purchase a new vehicle using credit rather than paying
cash up front. A common car loan today is a five year, 60 month loan.
As of July, 2011, the national average interest rate for a 5 year new
car loan was 5.52 percent.\583\ If the increased vehicle cost is spread
out over 5 years at 5.52 percent, the analysis for a MY 2025 vehicle
would
[[Page 75152]]
look like that shown in Table III-85. As can be seen in this table, the
fuel savings immediately outweigh the increased payments on the car
loan, amounting to $145 in discounted net savings (3% discount rate) in
the first year and similar savings for the next four years although
savings decline somewhat due to reduced VMT as the average vehicle
ages. Results are similar using a 7% discount rate. This means that for
every month that the average owner is making a payment for the
financing of the average new vehicle their monthly fuel savings would
be greater than the increase in the loan payments. This amounts to a
savings on the order of $12 per month throughout the duration of the 5
year loan. Note that in year six when the car loan is paid off, the net
savings equal the fuel savings less the increased insurance premiums
(as would be the case for the remaining years of ownership).
---------------------------------------------------------------------------
\583\ ``National Auto Loan Rates for July 21, 2011,'' http://www.bankrate.com/finance/auto/national-auto-loan-rates-for-july-21-2011.aspx, accessed 7/26/11 (Docket EPA-HQ-OAR-2010-0799).
[GRAPHIC] [TIFF OMITTED] TP01DE11.152
The lifetime fuel savings and net savings can also be calculated
for those who purchase the vehicle using cash and for those who
purchase the vehicle with credit. This calculation applies to the
vehicle owner who retains the vehicle for its entire life and drives
the vehicle each year at the rate equal to the national projected
average. The results are shown in Table III-86. In either case, the
present value of the lifetime net savings is greater than $4,200 at a
3% discount rate, or $2,900 at a 7% discount rate.
[[Page 75153]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.153
Note that throughout this consumer payback discussion, the analysis
reflects the average number of vehicle miles traveled per year. Drivers
who drive more miles than the average would incur fuel-related savings
more quickly and, therefore, the payback would come sooner. Drivers who
drive fewer miles than the average would incur fuel related savings
more slowly and, therefore, the payback would come later.
Another method to estimate effects on vehicle sales is to model the
market for vehicles. Consumer vehicle choice models estimate what
vehicles consumers buy based on vehicle and consumer characteristics.
In principle, such models could provide a means of understanding both
the role of fuel economy in consumers' purchase decisions and the
effects of this rule on the benefits that consumers will get from
vehicles. Helfand and Wolverton discuss the wide variation in the
structure and results of these models.\584\ Models or model results
have not frequently been systematically compared to each other. When
they have, the results show large variation over, for instance, the
value that consumers place on additional fuel economy. As discussed in
Section III.H.1 and in Chapter 8.1.2.8 of the DRIA, EPA is exploring
development of a consumer vehicle choice model, but the model is not
sufficiently developed for use in this NPRM.
---------------------------------------------------------------------------
\584\ Helfand, Gloria, and Ann Wolverton. ``Evaluating the
Consumer Response to Fuel Economy: A Review of the Literature.''
International Review of Environmental and Resource Economics 5
(2011): 103-146 (Docket EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------
The effect of this rule on the use and scrappage of older vehicles
will be related to its effects on new vehicle prices, the fuel
efficiency of new vehicle models, the fuel efficiency of used vehicles,
and the total sales of new vehicles. If the value of fuel savings
resulting from improved fuel efficiency to the typical potential buyer
of a new vehicle outweighs the average increase in new models' prices,
sales of new vehicles could rise, while scrappage rates of used
vehicles will increase slightly. This will cause the turnover of the
vehicle fleet (i.e., the retirement of used vehicles and their
replacement by new models) to accelerate slightly, thus accentuating
the anticipated effect of the rule on fleet-wide fuel consumption and
CO2 emissions. However, if potential buyers value future
fuel savings resulting from the increased fuel efficiency of new models
at less than the increase in their average selling price, sales of new
vehicles will decline, as will the rate at which used vehicles are
retired from service. This effect will slow the replacement of used
vehicles by new models, and thus partly reduce the anticipated effects
of this rule on fuel use and emissions.
Because of the uncertainty regarding how the value of projected
fuel savings from this rule to potential buyers will compare to their
estimates of increases in new vehicle prices, we have not attempted to
estimate explicitly the effects of the rule on scrappage of older
vehicles and the turnover of the vehicle fleet.
Chapter 5 of EPA's DRIA provides more information on the payback
period analysis, and Chapter 8 of EPA's DRIA has further discussion of
methods for examining the effects of this rule on vehicle sales. We
welcome comments on all aspects of this discussion, including the full
range of considerations and assumptions which influence market behavior
and outcomes and associated uncertainties. We also welcome comments on
all the parameters described here, as well as other quantitative
estimates of the effects of this proposal on sales, accompanied by
detailed descriptions of the methodologies used.
11. Employment Impacts
a. Introduction
Although analysis of employment impacts is not part of a cost-
benefit analysis (except to the extent that labor costs contribute to
costs), employment impacts of federal rules are of particular concern
in the current economic climate
[[Page 75154]]
of sizeable unemployment. When President Obama requested that the
agencies develop this program, he sought a program that would
``strengthen the [auto] industry and enhance job creation in the United
States.'' \585\ The recently issued Executive Order 13563, ``Improving
Regulation and Regulatory Review'' (January 18, 2011), states, ``Our
regulatory system must protect public health, welfare, safety, and our
environment while promoting economic growth, innovation,
competitiveness, and job creation'' (emphasis added). EPA is
accordingly providing partial estimates of the effects of this proposal
on domestic employment in the auto manufacturing and parts sectors,
while qualitatively discussing how it may affect employment in other
sectors more generally.
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\585\ President Barack Obama. ``Presidential Memorandum
Regarding Fuel Efficiency Standards. The White House, Office of the
Press Secretary, May 21, 2010. http://www.whitehouse.gov/the-press-office/presidential-memorandum-regarding-fuel-efficiency-standards.
---------------------------------------------------------------------------
This proposal is expected to affect employment in the United States
through the regulated sector--the auto manufacturing industry--and
through several related sectors, specifically, industries that supply
the auto manufacturing industry (e.g., vehicle parts), auto dealers,
the fuel refining and supply sectors, and the general retail sector.
According to the U.S. Bureau of Labor Statistics, in 2010, about
677,000 people in the U.S. were employed in the Motor Vehicle and Parts
Manufacturing Sector (NAICS 3361, 3362, and 3363). About 129,000 people
in the U.S. were employed specifically in the Automobile and Light
Truck Manufacturing Sector (NAICS 33611), the directly regulated
sector, since it encompasses the auto manufacturers that are
responsible for complying with the proposed standards.\586\ The
employment effects of this rule are expected to expand beyond the
regulated sector. Though some of the parts used to achieve the proposed
standards are likely to be built by auto manufacturers themselves, the
auto parts manufacturing sector also plays a significant role in
providing those parts, and will also be affected by changes in vehicle
sales. Changes in light duty vehicle sales, discussed in Section
III.H.10, could affect employment for auto dealers. As discussed in
Chapter 5.4 of the DRIA, this proposal is expected to reduce the amount
of fuel these vehicles use, and thus affect the petroleum refinery and
supply industries. Finally, since the net reduction in cost associated
with this proposal is expected to lead to lower household expenditures
on fuel net of vehicle costs, consumers then will have additional
discretionary income that can be spent on other goods and services.
---------------------------------------------------------------------------
\586\ U.S. Bureau of Labor Statistics, Quarterly Census of
Employment and Wages, as accessed on August 9, 2011.
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When the economy is at full employment, an environmental regulation
is unlikely to have much impact on net overall U.S. employment;
instead, labor would primarily be shifted from one sector to another.
These shifts in employment impose an opportunity cost on society,
approximated by the wages of the employees, as regulation diverts
workers from other activities in the economy. In this situation, any
effects on net employment are likely to be transitory as workers change
jobs (e.g., some workers may need to be retrained or require time to
search for new jobs, while shortages in some sectors or regions could
bid up wages to attract workers).
On the other hand, if a regulation comes into effect during a
period of high unemployment, a change in labor demand due to regulation
may affect net overall U.S. employment because the labor market is not
in equilibrium. In such a period, both positive and negative employment
effects are possible.\587\ Schmalansee and Stavins point out that net
positive employment effects are possible in the near term when the
economy is at less than full employment due to the potential hiring of
idle labor resources by the regulated sector to meet new requirements
(e.g., to install new equipment) and new economic activity in sectors
related to the regulated sector.\588\ In the longer run, the net effect
on employment is more difficult to predict and will depend on the way
in which the related industries respond to the regulatory requirements.
As Schmalansee and Stavins note, it is possible that the magnitude of
the effect on employment could vary over time, region, and sector, and
positive effects on employment in some regions or sectors could be
offset by negative effects in other regions or sectors. For this
reason, they urge caution in reporting partial employment effects since
it can ``paint an inaccurate picture of net employment impacts if not
placed in the broader economic context.''
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\587\ Masur and Posner, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1920441.
\588\ Schmalensee, Richard, and Robert N. Stavins. ``A Guide to
Economic and Policy Analysis of EPA's Transport Rule.'' White paper
commissioned by Excelon Corporation, March 2011 (Docket EPA-HQ-OAR-
2010-0799).
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It is assumed that the official unemployment rate will have
declined to 5.3 percent by the time this rule takes effect and so the
effect of the regulation on labor will be to shift workers from one
sector to another.\589\ Those shifts in employment impose an
opportunity cost on society, approximated by the wages of the
employees, as regulation diverts workers from other activities in the
economy. In this situation, any effects on net employment are likely to
be transitory as workers change jobs (e.g., some workers may need to be
retrained or require time to search for new jobs, while shortages in
some sectors or regions could bid up wages to attract workers). It is
also possible that the state of the economy will be such that positive
or negative employment effects will occur.
---------------------------------------------------------------------------
\589\ Office of Management and Budget, ``Fiscal Year 2012 Mid-
Session Review: Budget of the U.S. Government.'' http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/12msr.pdf, p. 10.
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A number of different approaches have been used in published
literature to conduct employment analysis. All potential methods of
estimating employment impacts of a rule have advantages and
limitations. We seek comment on the analytical approach presented here,
other appropriate methods for analyzing employment impacts for this
rulemaking, and the inputs used here for employment analysis.
b. Approaches to Quantitative Employment Analysis
Measuring the employment impacts of a policy depend on a number of
inputs and assumptions. For instance, as discussed, assumptions about
the overall state of unemployment in the economy play a major role in
measured job impacts. The inputs to the models commonly are the changes
in quantities or expenditures in the affected sectors; model results
may vary in different studies depending on the assumptions about the
levels of those inputs, and which sectors receive those changes. Which
sectors are included in the study can also affect the results. For
instance, a study of this program that looks only at employment impacts
in the refinery sector may find negative effects, because consumers
will purchase less gasoline; a study that looks only at the auto parts
sector, on the other hand, may find positive impacts, because the
program will require redesigned or additional parts for vehicles. In
both instances, these would only be partial perspectives
[[Page 75155]]
on the overall change in national employment due to Federal regulation.
i. Conceptual Framework for Employment Impacts in the Regulated Sector
One study by Morgenstern, Pizer, and Shih \590\ provides a
retrospective look at the impacts of regulation in employment in the
regulated sectors by estimating the effects on employment of spending
on pollution abatement for four highly polluting/regulated U.S.
industries (pulp and paper, plastics, steel, and petroleum refining)
using data for six years between 1979 and 1991. The paper provides a
theoretical framework that can be useful for examining the impacts of a
regulatory change on the regulated sector in the medium to longer term.
In particular, it identifies three separate ways that employment levels
may change in the regulated industry in response to a new (or more
stringent) regulation.
---------------------------------------------------------------------------
\590\ Morgenstern, Richard D., William A. Pizer, and Jhih-Shyang
Shih. ``Jobs Versus the Environment: An Industry-Level
Perspective.'' Journal of Environmental Economics and Management 43
(2002): 412-436 (Docket EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------
Demand effect: higher production costs due to the
regulation will lead to higher market prices; higher prices in turn
reduce demand for the good, reducing the demand for labor to make that
good. In the authors' words, the ``extent of this effect depends on the
cost increase passed on to consumers as well as the demand elasticity
of industry output.''
Cost effect: as costs go up, plants add more capital and
labor (holding other factors constant), with potentially positive
effects on employment. In the authors' words, as ``production costs
rise, more inputs, including labor, are used to produce the same amount
of output.''
Factor-shift effect: post-regulation production
technologies may be more or less labor-intensive (i.e., more/less labor
is required per dollar of output). In the authors' words,
``environmental activities may be more labor intensive than
conventional production,'' meaning that ``the amount of labor per
dollar of output will rise,'' though it is also possible that ``cleaner
operations could involve automation and less employment, for example.''
According to the authors, the ``demand effect'' is expected to have a
negative effect on employment,\591\ the ``cost effect'' to have a
positive effect on employment, and the ``factor-shift effect'' to have
an ambiguous effect on employment. Without more information with
respect to the magnitude of these competing effects, it is not possible
to predict the total effect environmental regulation will have on
employment levels in a regulated sector.
---------------------------------------------------------------------------
\591\ As will be discussed below, the demand effect in this
proposal is potentially an exception to this rule. While the
vehicles become more expensive, they also produce reduced fuel
expenditures; the reduced fuel costs provide a countervailing impact
on vehicle sales. As discussed in Preamble Section III.H.1, this
possibility that vehicles may become more attractive to consumers
after the program poses a conundrum: Why have interactions between
vehicle buyers and producers not provided these benefits without
government intervention?
---------------------------------------------------------------------------
The authors conclude that increased abatement expenditures
generally have not caused a significant change in employment in those
sectors. More specifically, their results show that, on average across
the industries studied, each additional $1 million spent on pollution
abatement results in a (statistically insignificant) net increase of
1.5 jobs.
This approach to employment analysis has the advantage of carefully
controlling for many possibly confounding effects in order to separate
the effect of changes in regulatory costs on employment. It was,
however, conducted for only four sectors. It could also be very
difficult to update the study for other sectors, because one of the
databases on which it relies, the Pollution Abatement Cost and
Expenditure survey, has been conducted infrequently since 1994, with
the last survey conducted in 2005. The empirical estimates provided by
Morgenstern et al. are not relevant to the case of fuel economy
standards, which are very different from the pollution control
standards on industrial facilities that were considered in that study.
In addition, it does not examine the effects of regulation on
employment in sectors related to but outside of the regulated sector.
Nevertheless, the theory that Morgenstern et al. developed continues to
be useful in this context.
The following discussion of additional methodologies draws from
Berck and Hoffmann's review of employment models.\592\
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\592\ Berck, Peter, and Sandra Hoffmann. ``Assessing the
Employment Impacts of Environmental and Natural Resource Policy.''
Environmental and Resource Economics 22 (2002): 133-156 (Docket EPA-
HQ-OAR-2010-0799) (Docket EPA-HQ-OAR-2010-0799).
---------------------------------------------------------------------------
ii. Computable General Equilibrium (CGE) Models
Computable general equilibrium (CGE) models are often used to
assess the impacts of policy. These models include a stylized
representation of supply and demand curves for all major markets in the
economy. The labor market is commonly included. CGE models are very
useful for looking at interaction effects of markets: ``They allow for
substitution among inputs in production and goods in consumption.''
Thus, if one market experiences a change, such as a new regulation,
then the effects can be observed in all other markets. As a result,
they can measure the employment changes in the economy due to a
regulation. Because they usually assume equilibrium in all markets,
though, they typically lack involuntary unemployment. If the total
amount of labor changes, it is due to people voluntarily entering or
leaving the workforce. As a result, these models may not be appropriate
for measuring effects of a policy on unemployment, because of the
assumption that there is no involuntary unemployment. In addition,
because of the assumptions of equilibrium in all markets and forward-
looking consumers and firms, they are designed for examining the long-
run effects of a policy but may offer little insight into its short-run
effects.
iii. Input-Output (IO) Models
Input-output models represent the economy through a matrix of
coefficients that describe the connections between supplying and
consuming sectors. In that sense, like CGE models, they describe the
interconnections of the economy. These interconnections look at how
changes in one sector ripple through the rest of the economy. For
instance, a requirement for additional technology for vehicles requires
additional steel, which requires more workers in both the auto and
steel sectors; the additional workers in those sectors then have more
money to spend, which leads to more employment in retail sectors. These
are known as ``multiplier'' effects, because an initial impact in one
sector gets multiplied through the economy. Unlike CGE models, input-
output models have fixed, linear relationships among the sectors (e.g.,
substitution among inputs or goods is not allowed), and quantity
supplied need not equal quantity demanded. In particular, these models
do not allow for price changes--an increase in the demand for labor or
capital does not result in a change in its price to help reallocate it
to its best use. As a result, these models cannot capture opportunity
costs from using resources in one area of the economy over another. The
multipliers take an initial impact and can increase it substantially.
IO models are commonly used for regional analysis of projects. In a
regional analysis, the markets are commonly considered small enough
that wages and prices are determined outside the region, and any excess
[[Page 75156]]
supply or demand is due to exports and imports (or, in the case of
labor, emigration or immigration). For national-level employment
analysis, the use of input-output models requires the assumption that
workers flow into or out of the labor market perfectly freely. Wages do
not adjust; instead, people join into or depart from the labor pool as
production requires them. For other markets as well, there is no
substitution of less expensive inputs for more expensive ones. As a
result, IO models provide an upper bound on employment impacts. As
Berck and Hoffmann note, ``For the same reason, they can be thought of
as simulating very short-run adjustment,'' in contrast to the CGE's
implicit assumption of long-run adjustment. Changes in production
processes, introducing new technologies, or learning over time due to
new regulatory requirements are also generally not captured by IO
models, as they are calibrated to already established relationships
between inputs and outputs.
iv. Hybrid Models
As Berck and Hoffmann note, input-output models and CGE models
``represent a continuum of closely related models.'' Though not
separately discussed by Berck and Hoffmann, some hybrid models combine
some of the features of CGE models (e.g., prices that can change) with
input-output relationships. For instance, a hybrid model may include
the ability to examine disequilibrium phenomena, such as labor being at
less than full employment. Hybrid models depend on assumptions about
how adjustments in the economy occur. CGE models characterize
equilibria but say little about the pathway between them, while IO
models assume that adjustments are largely constrained by previously
defined relationships; the effectiveness of hybrid models depends on
their success in overcoming the limitations of each of these
approaches. Hybrid models could potentially be used to model labor
market impacts of various vehicle policy options, although a number of
judgments need to be made about the appropriate assumptions underlying
the model as well as the empirical basis for the modeling results.
v. Single Sectors
It is possible to conduct a bottom-up analysis of the partial
effect of regulation on employment in a single sector by estimating the
change in output or expenditures in a sector and multiplying it by an
estimate of the number of workers per unit of output or expenditures,
under the assumption that labor demand is proportional to output or
expenditures. As Berck and Hoffmann note, though, ``Compliance with
regulations may create additional jobs that are not accounted for.''
While such an analysis can approximate the effects in that one sector
in a simple way, it also may miss important connections to related
sectors.
vi. Ex-Post Econometric Studies
A number of ex-post econometric analyses examine the net effect of
regulation on employment in regulated sectors. Morgenstern, Pizer, and
Shih (2002), discussed above, and Berman and Bui (2001) are two notable
examples that rely on highly disaggregated establishment-level time
series data to estimate longer-run employment effects.\593\ While often
a sophisticated treatment of the issues analyzed, these studies
commonly analyze specific scenarios or sectors in the past; care needs
to be taken in extrapolating their results to other scenarios and to
the future. For instance, neither of these two studies examines the
auto industry and are therefore of limited applicability in this
context.
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\593\ Berman, Eli, and Linda T. Bui, (2001) ``Environmental
Regulation and Labor Demand: Evidence from the South Coast Air
Basin,'' Journal of Public Economics, 79, 265--295 (Docket EPA-HQ-
OAR-2010-0799).
---------------------------------------------------------------------------
vii. Summary
All methods of estimating employment impacts of a regulation have
advantages and limitations. CGE models may be most appropriate for
long-term impacts, but the usual assumption of equilibrium in the
employment market means that it is not useful for looking at changes in
overall employment: overall levels are likely to be premised on full
employment. IO models, on the other hand, may be most appropriate for
small-scale, short-term effects, because they assume fixed
relationships across sectors and do not require market equilibria.
Hybrid models, which combine some features of CGEs with IO models,
depend upon key assumptions and economic relationships that are built
into them. Single-sector models are simple and straightforward, but
they are often based on the assumptions that labor demand is
proportional to output, and that other sectors are not affected.
Finally, econometric models have been developed to evaluate the longer-
run net effects of regulation on sector employment, though these are
ex-post analyses commonly of specific sectors or situations, and the
results may not have direct bearing for the regulation being reviewed.
We seek comment on the analytical approaches presented here, the inputs
used below for employment analysis, and other appropriate methods for
analyzing employment impacts for this rulemaking.
c. Employment analysis of this proposal
As mentioned above, this program is expected to affect employment
in the regulated sector (auto manufacturing) and other sectors directly
affected by the proposal: auto parts suppliers, auto dealers, the fuel
supply market (which will face reduced petroleum production due to
reduced fuel demand but which may see additional demand for electricity
or other fuels), and consumers (who will face higher vehicle costs and
lower fuel expenditures). In addition, as the discussion above
suggests, each of these sectors could potentially have ripple effects
in the rest of the economy. These ripple effects depend much more
heavily on the state of the macroeconomy than do the direct effects. At
the national level, employment may increase in one industry or region
and decrease in another, with the net effect being smaller than either
individual-sector effect. EPA does not attempt to quantify the net
effects of the regulation on overall national employment.
The discussion that follows provides a partial, bottom-up
quantitative estimate of the effects of this proposal on the regulated
sector (the auto industry; for reasons discussed below, we include some
quantitative assessment of effects on suppliers to the industry,
although they are not regulated directly). It also includes qualitative
discussion of the effects of the proposal on other sectors. Focusing
quantification of employment impacts on the regulated sector has some
advantages over quantifying all impacts. First, the analysis relies on
data generated as part of the rulemaking process, which focuses on the
regulated sector; as a result, what is presented here is based on
internally consistent assumptions and estimates made in this proposal.
Secondly, as discussed above, net effects on employment in the economy
as a whole depend heavily on the overall state of the economy when this
rule has its effects. Focusing on the regulated sector provides insight
into employment effects in that sector without having to make
assumptions about the state of the economy when this rule has its
impacts. We include a qualitative discussion of employment effects
other sectors to provide a broader perspective on the impacts of this
rule.
[[Page 75157]]
As noted above, in a full-employment economy, any changes in
employment will result from people changing jobs or voluntarily
entering or exiting the workforce. In a full-employment economy,
employment impacts of this proposal will change employment in specific
sectors, but it will have small, if any, effect on aggregate
employment. This rule would take effect in 2017 through 2025; by then,
the current high unemployment may be moderated or ended. For that
reason, this analysis does not include multiplier effects, but instead
focuses on employment impacts in the most directly affected industries.
Those sectors are likely to face the most concentrated employment
impacts. The agencies seek comment on other sectors that are likely to
be significantly affected and thus warrant further analysis in the
final rulemaking analysis.
i. Employment Impacts in the Auto Industry
Following the Morgenstern et al. conceptual framework for the
impacts of regulation on employment in the regulated sector, we
consider three effects for the auto sector: the demand effect, the cost
effect, and the factor shift effect. However, we are only able to offer
quantitative estimates for the cost effect. We note that these
estimates, based on extrapolations from current data, become more
uncertain as time goes on.
(1) The Demand Effect
The demand effect depends on the effects of this proposal on
vehicle sales. If vehicle sales increase, then more people will be
required to assemble vehicles and their components. If vehicle sales
decrease, employment associated with these activities will
unambiguously decrease. Unlike in Morgenstern et al.'s study, where the
demand effect unambiguously decreased employment, there are
countervailing effects in the vehicle market due to the fuel savings
resulting from this program. On one hand, this proposal will increase
vehicle costs; by itself, this effect would reduce vehicle sales. On
the other hand, this proposal will reduce the fuel costs of operating
the vehicle; by itself, this effect would increase vehicle sales,
especially if potential buyers have an expectation of higher fuel
prices. The sign of demand effect will depend on which of these effects
dominates. Because, as described in Chapter 8.1, we have not quantified
the impact on sales for this proposal, we do not quantify the demand
effect.
(2) The Cost Effect
The demand effect, discussed above, measures employment changes due
to new vehicle sales only. The cost effect measures employment impacts
due to the new or additional technologies needed for vehicles to comply
with the proposed standards. As DRIA Chapter 8.2.3.1.3 explains, we
estimate the cost effect by multiplying the costs of rule compliance by
ratios of workers to each $1 million of expenditures in that sector.
The magnitude and relative size of these ratios depends on the sectors'
labor intensity of the production process.
The use of these ratios has both advantages and limitations. It is
often possible to estimate these ratios for quite specific sectors of
the economy; as a result, it is not necessary to extrapolate employment
ratios from possibly unrelated sectors. On the other hand, these
estimates are averages for the sectors, covering all the activities in
those sectors; they may not be representative of the labor required
when expenditures are required on specific activities, as the factor
shift effect (discussed below) indicates. In addition, these estimates
do not include changes in sectors that supply these sectors, such as
steel or electronics producers. They thus may best be viewed as the
effects on employment in the auto sector due to the changes in
expenditures in that sector, rather than as an assessment of all
employment changes due to these changes in expenditures.
Some of the costs of this proposal will be spent directly in the
auto manufacturing sector, but some of the costs will be spent in the
auto parts manufacturing sector. Because we do not have information on
the proportion of expenditures in each sector, we separately present
the ratios for both the auto manufacturing sector and the auto parts
manufacturing sector. These are not additive, but should instead be
considered as a range of estimates for the cost effect, depending on
which sector adds technologies to the vehicles to comply with the
regulation.
We use several public sources for estimates of employment per $1
million expenditures: The U.S. Bureau of Labor Statistics' (BLS)
Employment Requirements Matrix (ERM); \594\ the Census Bureau's Annual
Survey of Manufactures \595\ (ASM); and the Census Bureau's Economic
Census. DRIA Chapter 8.2.3.1.2 provides details on all these sources.
The ASM and the Economic Census have more sectoral detail than the ERM;
we provide estimates for both Motor Vehicle Manufacturing and Light
Duty Vehicle Manufacturing sectors for comparison purposes. For all of
these, we adjust for the ratio of domestic production to domestic
sales. The maximum value for employment impacts per $1 million
expenditures (after accounting for the share of domestic production) in
2009 was estimated to be 2.049 if all the additional costs are in the
parts sector; the minimum value is 0.407, if all the additional costs
are in the light-duty vehicle manufacturing sector: That is, the range
of employment impacts is between 0.4 and 2 additional jobs per $1
million expenditures in the sector. The different data sources provide
similar magnitudes for the estimates for the sectors. Parts
manufacturing appears to be more labor-intensive than vehicle
manufacturing; light-duty vehicle manufacturing appears to be slightly
less labor-intensive than motor vehicle manufacturing as a whole. As
discussed in the DRIA, trends in the BLS ERM are used to estimate
productivity improvements over time that are used to adjust these
ratios over time. Table III-87 shows the cost estimates developed for
this rule, discussed in Section III.H.2. Multiplying those cost
estimates by the maximum and minimum values for the cost effect
(maximum using the ASM ratio if all additional costs are in the parts
sector, and minimum using the Economic Census ratio for the light-duty
sector if all additional costs are borne by auto manufacturers)
provides the cost effect employment estimates. This is a simple way to
examine the relationship between labor required and expenditure, and we
seek comment on refining this method.
---------------------------------------------------------------------------
\594\ http://www.bls.gov/emp/ep_data_emp_requirements.htm.
\595\ http://www.census.gov/manufacturing/asm/index.html.
---------------------------------------------------------------------------
While we estimate employment impacts beginning with the first year
of the standard (2017), some of these job gains may occur earlier as
auto manufacturers and parts suppliers hire staff in anticipation of
compliance with the standard.
[[Page 75158]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.154
(3) The Factor Shift Effect
The factor shift effect looks at the effects on employment due to
changes in labor intensity associated with a regulation. As noted
above, the estimates of the cost effect assume constant labor per $1
million in expenditures, though the new technologies may be either more
or less labor-intensive than the existing ones. An estimate of the
factor shift effect would either increase or decrease the estimate used
for the cost effect.
We are not quantifying the factor shift effect here, for lack of
data on the labor intensity of all the possible technologies that
manufacturers could use to comply with the proposed standards. As
discussed in DRIA Chapter 8.2.3.1.3, though, for a subset of the
technologies, EPA-sponsored research (discussed in Chapter 3.2.1.1 of
the Joint TSD), which compared new technologies to existing ones at the
level of individual components, found that labor use for the new
technologies increased: The new fuel-saving technologies use more labor
than the baseline technologies. For instance, switching from a
conventional mid-size vehicle to a hybrid version of that vehicle
involves an additional $395.85 in labor costs, which we estimate to
require an additional 8.6 hours per vehicle.\596\ For a subset of the
technologies likely to be used to meet the standards in this proposal,
then, the factor shift effect increases labor demand, at least in the
short run; in the long run, as with all technologies, the cost
structure is likely to change due to learning, economies of scale, etc.
The technologies examined in this research are, however, only a subset
of the technologies that auto makers may use to comply with the
standards proposed here. As a result, these results cannot be
considered definitive evidence that the factor-shift effect increases
employment for this rule. We therefore do not quantify the factor shift
effect.
---------------------------------------------------------------------------
\596\ FEV, Inc. ``Light Duty Technology Cost Analysis, Power-
Split and P2 HEV Case Studies.'' EPA Report EPA-420-R-11--015,
November 2011 (Docket EPA-HQ-OAR-2010-0799).
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[[Page 75159]]
(4) Summary of Employment Effects in the Auto Sector
While we are not able to quantify the demand or factor shift
effects, the cost effect results show that the employment effects of
the increased spending in the regulated sector (and, possibly, the
parts sector) are expected to be positive and on the order of a few
thousand in the initial years of the program. As noted above, the motor
vehicle and parts manufacturing sectors employed about 677,000 people
in 2010, with automobile and light truck manufacturing accounting for
about 129,000 of that total.
ii. Effects on Employment for Auto Dealers
The effects of the proposed standards on employment for auto
dealers depend principally on the effects of the standards on light
duty vehicle sales. In addition, auto dealers may be affected by
changes in maintenance and service costs. Increases in those costs are
likely to increase labor demand in dealerships.
Although this proposal predicts very small penetration of advanced
technology vehicles, the uncertainty on consumer acceptance of such
technology vehicles is even greater. As discussed in Section III.H.1.b,
consumers may find some characteristics of electric vehicles and plug-
in hybrid electric vehicles, such as the ability to fuel with
electricity rather than gasoline, attractive; they may find other
characteristics, such as the limited range for electric vehicles,
undesirable. As a result, some consumers will find that EVs will meet
their needs, but other buyers will choose more conventional vehicles.
Auto dealers may play a major role in explaining the merits and
disadvantages of these new technologies to vehicle buyers. There may be
a temporary need for increased employment to train sales staff in the
new technologies as the new technologies become available.
iii. Effects on Employment in the Auto Parts Sector
As discussed in the context of employment in the auto industry,
some vehicle parts are made in-house by auto manufacturers; others are
made by independent suppliers who are not directly regulated, but who
will be affected by the proposed standards as well. The additional
expenditures on technologies are expected to have a positive effect on
employment in the parts sector as well as the manufacturing sector; the
breakdown in employment between the two sectors is difficult to
predict. The effects on the parts sector also depend on the effects of
the proposed standards on vehicle sales and on the labor intensity of
the new technologies, qualitatively in the same ways as for the auto
manufacturing sector.
iv. Effects on Employment for Fuel Suppliers
In addition to the effects on the auto manufacturing and parts
sectors, these rules will result in changes in fuel use that lower GHG
emissions. Fuel saving, principally reductions in liquid fuels such as
gasoline and diesel, will affect employment in the fuel suppliers
industry sectors throughout the supply chain, from refineries to
gasoline stations. To the extent that the proposed standards result in
increased use of electricity, natural gas, or other fuels, employment
effects will result from providing these fuels and developing the
infrastructure to supply them to consumers.
Expected petroleum fuel consumption reductions can be found in
Section III.H.3. While those figures represent fuel savings for
purchasers of fuel, it represents a loss in value of output for the
petroleum refinery industry, fuel distribution, and gasoline stations.
The loss of expenditures to petroleum fuel suppliers throughout the
petroleum fuel supply chain, from the petroleum refiners to the
gasoline stations, is likely to result in reduced employment in these
sectors.
This rule is also expected to lead to increases in electricity
consumption by vehicles, as discussed in Section III.H.4. This new fuel
may require additional infrastructure, such as electricity charging
locations. Providing this infrastructure will require some increased
employment. In addition, the generation of electricity will also
require some additional labor. We have insufficient information at this
time to predict whether the increases in labor associated with
increased infrastructure provision and fuel generation for these newer
fuels will be greater or less than the employment reductions associated
with reduced demand for petroleum fuels.
v. Effects on Employment Due to Impacts on Consumer Expenditures
As a result of these proposed standards, consumers will pay a
higher up-front cost for the vehicles, but they will recover those
costs in a fairly short payback period (see Section III.H.10.b);
indeed, people who finance their vehicles are expected to find that
their fuel savings per month exceed the increase in the loan cost
(though this depends on the particular loan rate a consumer receives).
As a result, consumers will have additional money to spend on other
goods and services, though, for those who do not finance their
vehicles, it will occur after the initial payback period. These
increased expenditures will support employment in those sectors where
consumers spend their savings.
These increased expenditures will occur in 2017 and beyond. If the
economy returns to full employment by that time, any change in consumer
expenditures would primarily represent a shift in employment among
sectors. If, on the other hand, the economy still has substantial
unemployment, these expenditures would contribute to employment through
increased consumer demand.
d. Summary
The primary employment effects of this proposal are expected to be
found throughout several key sectors: auto manufacturers, auto dealers,
auto parts manufacturing, fuel production and supply, and consumers.
This rule initially takes effect in model year 2017, a time period
sufficiently far in the future that the current sustained high
unemployment at the national level may be moderated or ended. In an
economy with full employment, the primary employment effect of a
rulemaking is likely to be to move employment from one sector to
another, rather than to increase or decrease employment. For that
reason, we focus our partial quantitative analysis on employment in the
regulated sector, to examine the impacts on that sector directly. We
discuss the likely direction of other impacts in the regulated sector
as well as in other directly related sectors, but we do not quantify
those impacts, because they are more difficult to quantify with
reasonable accuracy, particularly so far into the future.
For the regulated sector, we have not quantified the demand effect.
The cost effect is expected to increase employment by 600-3,600 workers
in 2017 depending on the share of that employment that is in the auto
manufacturing sector compared to the auto parts manufacturing sector.
As mentioned above, some of these job gains may occur earlier as auto
manufacturers and parts suppliers hire staff to prepare to comply with
the standard. The demand effect is ambiguous and depends on changes in
vehicle sales, which are not quantified for this proposal. Though we do
not have estimates of the factor shift effect for all potential
compliance technologies, the evidence which we do have for some
technologies suggests that
[[Page 75160]]
many of the technologies will have increased labor needs.
Effects in other sectors that are predicated on vehicle sales are
also ambiguous. Changes in vehicle sales are expected to affect labor
needs in auto dealerships and in parts manufacturing. Increased
expenditures for auto parts are expected to require increased labor to
build parts, though this effect also depends on any changes in the
labor intensity of production; as noted, the subset of potential
compliance technologies for which data are available show increased
labor requirements. Reduced fuel production implies less employment in
the petroleum sectors. Finally, consumer spending is expected to affect
employment through changes in expenditures in general retail sectors;
net fuel savings by consumers are expected to increase demand (and
therefore employment) in other sectors.
I. Statutory and Executive Order Reviews
a. Executive Order 12866: ``Regulatory Planning and Review and
Executive Order 13563: Improving Regulation and Regulatory Review''
Under section 3(f)(1) of Executive Order 12866 (58 FR 51735,
October 4, 1993), this action is an ``economically significant
regulatory action'' because it is likely to have an annual effect on
the economy of $100 million or more. Accordingly, EPA submitted this
action to the Office of Management and Budget (OMB) for review under
Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011) and any
changes made in response to OMB recommendations have been documented in
the docket for this action as required by CAA section 307(d)(4)(B)(ii).
In addition, EPA prepared an analysis of the potential costs and
benefits associated with this action. This analysis is contained in the
Draft Regulatory Impact Analysis, which is available in the docket for
this rulemaking and at the docket internet address listed under
ADDRESSES above.
b. Paperwork Reduction Act
The information collection requirements in this proposed rule have
been submitted for approval to the Office of Management and Budget
(OMB) under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. The
Information Collection Request (ICR) document prepared by EPA has been
assigned EPA ICR number 0783.61.
The Agency proposes to collect information to ensure compliance
with the provisions in this rule. This includes a variety of
requirements for vehicle manufacturers. Section 208(a) of the Clean Air
Act requires that vehicle manufacturers provide information the
Administrator may reasonably require to determine compliance with the
regulations; submission of the information is therefore mandatory. We
will consider confidential all information meeting the requirements of
section 208(c) of the Clean Air Act.
As shown in Table III-88, the total annual reporting burden
associated with this proposal is about 5,100 hours and $1.36 million,
based on a projection of 33 respondents. The estimated burden for
vehicle manufacturers is a total estimate for new reporting
requirements. Burden means the total time, effort, or financial
resources expended by persons to generate, maintain, retain, or
disclose or provide information to or for a Federal agency. This
includes the time needed to review instructions; develop, acquire,
install, and utilize technology and systems for the purposes of
collecting, validating, and verifying information, processing and
maintaining information, and disclosing and providing information;
adjust the existing ways to comply with any previously applicable
instructions and requirements; train personnel to be able to respond to
a collection of information; search data sources; complete and review
the collection of information; and transmit or otherwise disclose the
information.
[GRAPHIC] [TIFF OMITTED] TP01DE11.155
An agency may not conduct or sponsor, and a person is not required
to respond to a collection of information unless it displays a
currently valid OMB control number. The OMB control numbers for EPA's
regulations in 40 CFR are listed in 40 CFR part 9.
To comment on the Agency's need for this information, the accuracy
of the provided burden estimates, and any suggested methods for
minimizing respondent burden, including the use of automated collection
techniques, EPA has established a public docket for this rule, which
includes this ICR, under Docket ID number EPA-HQ-OAR-2010-0799. Submit
any comments related to the ICR for this proposed rule to EPA and OMB.
See `Addresses' section at the beginning of this notice for where to
submit comments to EPA. Send comments to OMB at the Office of
Information and Regulatory Affairs, Office of Management and Budget,
725 17th Street NW., Washington, DC 20503, Attention: Desk Office for
EPA. Since OMB is required to make a decision concerning the ICR
between 30 and 60 days after December 1, 2011, a comment to OMB is best
assured of having its full effect if OMB receives it by January 3,
2012. The final rule will respond to any OMB or public comments on the
information collection requirements contained in this proposal.
c. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires an agency
to prepare a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements under the Administrative
Procedure Act or any other statute unless the agency certifies that the
rule will not have a significant economic impact on a substantial
number of small entities. Small entities include small businesses,
small organizations, and small governmental jurisdictions.
[[Page 75161]]
For purposes of assessing the impacts of this rule on small
entities, small entity is defined as: (1) A small business as defined
by the Small Business Administration's (SBA) regulations at 13 CFR
121.201 (see table below); (2) a small governmental jurisdiction that
is a government of a city, county, town, school district or special
district with a population of less than 50,000; and (3) a small
organization that is any not-for-profit enterprise which is
independently owned and operated and is not dominant in its field.
Table III-89 provides an overview of the primary SBA small business
categories included in the light-duty vehicle sector:
[GRAPHIC] [TIFF OMITTED] TP01DE11.156
After considering the economic impacts of today's proposal on small
entities, EPA certifies that this action will not have a significant
economic impact on a substantial number of small entities. As with the
MY 2012-2016 GHG standards, EPA is proposing to exempt manufacturers
meeting SBA's definition of small business as described in 13 CFR
121.201 due to unique issues involved with establishing appropriate GHG
standards for these small businesses and the potential need to develop
a program that would be structured differently for them (which would
require more time), and the extremely small emissions contribution of
these entities. EPA would instead consider appropriate GHG standards
for these entities as part of a future regulatory action.
Potentially affected small entities fall into three distinct
categories of businesses for light-duty vehicles: Small volume
manufacturers (SVMs), independent commercial importers (ICIs), and
alternative fuel vehicle converters. Based on our preliminary
assessment, EPA has identified a total of about 21 entities that fit
the Small Business Administration (SBA) criterion of a small business.
There are about 4 small manufacturers, including three electric vehicle
manufacturers, 8 ICIs, and 9 alternative fuel vehicle converters in the
light-duty vehicle market which are small businesses (no major vehicle
manufacturers meet the small-entity criteria as defined by SBA). EPA
estimates that these small entities comprise less than 0.1 percent of
the total light-duty vehicle sales in the U.S., and therefore the
proposed exemption will have a negligible impact on the GHG emissions
reductions from the proposed standards.
As discussed in Section III.B.7, EPA is proposing to allow small
businesses to waive their small entity exemption and optionally certify
to the GHG standards. This would allow small entity manufacturers to
earn CO2 credits under the GHG program, if their actual
fleetwide CO2 performance was better
[[Page 75162]]
than their fleetwide CO2 target standard. EPA proposes to
make the GHG program opt-in available starting in MY 2014, as the MY
2012, and potentially the MY 2013, certification process will have
already occurred by the time this rulemaking is finalized. EPA is also
proposing that manufacturers certifying to the GHG standards for MY
2014 would be eligible to generate early credits for vehicles sold in
MY 2012 and MY 2013. Manufacturers waiving their small entity exemption
would be required to meet all aspects of the GHG standards and program
requirements across their entire product line. However, the exemption
waiver would be optional for small entities and presumably
manufacturers would only opt into the GHG program if it is economically
advantageous for them to do so, for example through the generation and
sale of CO2 credits. Therefore, EPA believes adding this
voluntary option does not affect EPA's determination that the proposed
standards would impose no significant adverse impact on small entities.
Some commenters to the 2012-2016 light duty vehicle GHG rulemaking
argued that EPA is obligated under the RFA to consider indirect impacts
of the rules in assessing impacts on small businesses, in particular
potential impacts on stationary sources that would not be directly
regulated by the rule. EPA disagrees. When considering whether a rule
should be certified, the RFA requires an agency to look only at the
small entities to which the proposed rule will apply and which will be
subject to the requirement of the specific rule in question. 5 U.S.C.
603, 605 (b); Mid-Tex Elec. Coop. v. FERC, 773 F.3d 327, 342 (DC Cir.
1985). Reading section 605 in light of section 603, we conclude that an
agency may properly certify that no regulatory flexibility analysis is
necessary when it determines that the rule will not have a significant
economic impact on a substantial number of small entities that are
subject to the requirements of the rule; see also Cement Kiln Recycling
Coalition, v. EPA, 255 F.3d 855, 869 (DC Cir. 2001). DC Circuit has
consistently rejected the contention that the RFA applies to small
businesses indirectly affected by the regulation of other
entities.\597\
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\597\ In any case, any impacts on stationary sources arise
because of express statutory requirements in the CAA, not as a
result of vehicle GHG regulation. Moreover, GHGs have become subject
to regulation under the CAA by virtue of other regulatory actions
taken by EPA before this proposal.
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Since the proposal would regulate exclusively large motor vehicle
manufacturers and small vehicle manufacturers are exempted from the
standards, EPA is properly certifying that the 2017-2025 standards
would not have a significant economic impact on a substantial number of
small entities directly subject to the rule or otherwise would have a
positive economic effect on all of the small entities opting in to the
rule.
We continue to be interested in the potential impacts of the
proposed rule on small entities and welcome comments on issues related
to such impacts.
d. Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector.
This proposal contains no Federal mandates (under the regulatory
provisions of Title II of the UMRA) for State, local, or tribal
governments. The rule imposes no enforceable duty on any State, local
or tribal governments. This action is also not subject to the
requirements of section 203 of UMRA because EPA has determined that
this rule contains no regulatory requirements that might significantly
or uniquely affect small governments. EPA has determined that this
proposal contains a Federal mandate that may result in expenditures of
$100 million or more for the private sector in any one year. EPA
believes that the proposal represents the least costly, most cost-
effective approach to revise the light duty vehicle standards as
authorized by section 202(a)(1). See Section III.A.2.a above. The costs
and benefits associated with the proposal are discussed above and in
the Draft Regulatory Impact Analysis, as required by the UMRA.
e. Executive Order 13132: ``Federalism''
This proposed action would not have federalism implications. It
will not have substantial direct effects on the States, on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government, as specified in Executive Order 13132. This rulemaking
would apply to manufacturers of motor vehicles and not to state or
local governments; state and local governments that purchase new model
year 2017 and later vehicles will enjoy substantial fuel savings from
these more fuel efficient vehicles. Thus, Executive Order 13132 does
not apply to this action. Although section 6 of Executive Order 13132
does not apply to this action, EPA did consult with representatives of
state and local governments in developing this action.
In the spirit of Executive Order 13132, and consistent with EPA
policy to promote communications between EPA and State and local
governments, EPA specifically solicits comment on this proposed action
from State and local officials.
f. Executive Order 13175: ``Consultation and Coordination with Indian
Tribal Governments''
This proposed rule does not have tribal implications, as specified
in Executive Order 13175 (65 FR 67249, November 9, 2000). This rule
will be implemented at the Federal level and impose compliance costs
only on vehicle manufacturers. Tribal governments would be affected
only to the extent they purchase and use regulated vehicles; tribal
governments that purchase new model year 2017 and later vehicles will
enjoy substantial fuel savings from these more fuel efficient vehicles.
Thus, Executive Order 13175 does not apply to this rule. EPA
specifically solicits additional comment on this proposed rule from
tribal officials.
g. Executive Order 13045: ``Protection of Children from Environmental
Health Risks and Safety Risks''
This action is subject to EO 13045 (62 FR 19885, April 23, 1997)
because it is an economically significant regulatory action as defined
by EO 12866, and EPA believes that the environmental health or safety
risk addressed by this action may have a disproportionate effect on
children. Climate change impacts, and in particular the determinations
of the Administrator in the Endangerment and Cause or Contribute
Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act
(74 FR 66496, December 15, 2009), are summarized in Section III.F.2. In
making those Findings, the Administrator placed weight on the fact that
certain groups, including children, are particularly vulnerable to
climate-related health effects. In those Findings, the Administrator
determined that the health effects of climate change linked to observed
and projected elevated concentrations of GHGs include the increased
likelihood of more frequent and intense heat waves, increases in ozone
concentrations over broad areas of the country, an increase of the
severity of extreme weather events such as hurricanes and floods, and
increasing severity of coastal storms due to rising sea levels. These
effects can all increase mortality and morbidity, especially in
[[Page 75163]]
vulnerable populations such as children, the elderly, and the poor. In
addition, the occurrence of wildfires in North America have increased
and are likely to intensify in a warmer future. PM emissions from these
wildfires can contribute to acute and chronic illnesses of the
respiratory system, including pneumonia, upper respiratory diseases,
asthma, and chronic obstructive pulmonary disease, especially in
children.
EPA has estimated reductions in projected global mean surface
temperature and sea level rise as a result of reductions in GHG
emissions associated with the standards proposed in this action
(Section III.F.3). Due to their vulnerability, children may receive
disproportionate benefits from these reductions in temperature and the
subsequent reduction of increased ozone and severity of weather events.
The public is invited to submit comments or identify peer-reviewed
studies and data that assess effects of early life exposure to the
pollutants addressed by this proposed rule.
h. Executive Order 13211: ``Energy Effects''
Executive Order 13211; \598\ applies to any rule that: (1) Is
determined to be economically significant as defined under E.O. 12866,
and is likely to have a significant adverse effect on the supply,
distribution, or use of energy; or (2) that is designated by the
Administrator of the Office of Information and Regulatory Affairs as a
significant energy action. If the regulatory action meets either
criterion, we must evaluate the adverse energy effects of the proposed
rule and explain why the proposed regulation is preferable to other
potentially effective and reasonably feasible alternatives considered
by us.
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\598\ 66 FR 28355 (May 18, 2001).
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The proposed rule seeks to establish passenger car and light truck
fuel economy standards that would significantly reduce the consumption
of petroleum, would achieve energy security benefits, and would not
have any adverse energy effects (Section III.H.7). In fact, this rule
has a positive effect on energy supply and use. Because the GHG
emission standards finalized today result in significant fuel savings,
this rule encourages more efficient use of fuels. Accordingly, this
proposed rulemaking action is not designated as a significant energy
action as defined by E.O. 13211.
i. National Technology Transfer and Advancement Act
Section 12(d) of the National Technology Transfer and Advancement
Act of 1995 (``NTTAA''), Public Law 104-113, 12(d) (15 U.S.C. 272 note)
directs EPA to use voluntary consensus standards in its regulatory
activities unless to do so would be inconsistent with applicable law or
otherwise impractical. Voluntary consensus standards are technical
standards (e.g., materials, specifications, test methods, sampling
procedures, and business practices) that are developed or adopted by
voluntary consensus standards bodies. NTTAA directs EPA to provide
Congress, through OMB, explanations when the Agency decides not to use
available and applicable voluntary consensus standards.
For CO2 emissions, EPA is proposing to collect data over
the same tests that are used for the MY 2012-2016 CO2
standards and for the CAFE program. This will minimize the amount of
testing done by manufacturers, since manufacturers are already required
to run these tests. For A/C credits, EPA is proposing to use a
consensus methodology developed by the Society of Automotive Engineers
(SAE) and also a new A/C test. EPA knows of no consensus standard
available for the A/C test.
j. Executive Order 12898: ``Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations''
Executive Order (E.O.) 12898 (59 FR 7629 (Feb. 16, 1994))
establishes federal executive policy on environmental justice. Its main
provision directs federal agencies, to the greatest extent practicable
and permitted by law, to make environmental justice part of their
mission by identifying and addressing, as appropriate,
disproportionately high and adverse human health or environmental
effects of their programs, policies, and activities on minority
populations and low-income populations in the United States.
With respect to GHG emissions, EPA has determined that this
proposed rule will not have disproportionately high and adverse human
health or environmental effects on minority or low-income populations
because it increases the level of environmental protection for all
affected populations without having any disproportionately high and
adverse human health or environmental effects on any population,
including any minority or low-income population. The reductions in
CO2 and other GHGs associated with the proposed standards
will affect climate change projections, and EPA has estimated
reductions in projected global mean surface temperatures and sea-level
rise (Section III.F.3). Within settlements experiencing climate change,
certain parts of the population may be especially vulnerable; these
include the poor, the elderly, those already in poor health, the
disabled, those living alone, and/or indigenous populations dependent
on one or a few resources.\599\ Therefore, these populations may
receive disproportionate benefits from reductions in GHGs.
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\599\ U.S. EPA. (2009). Technical Support Document for
Endangerment or Cause or Contribute Findings for Greenhouse Gases
under Section 202(a) of the Clean Air Act. Washington, DC: U.S. EPA.
Retrieved on April 21, 2009 from http://epa.gov/climatechange/endangerment/downloads/TSD_Endangerment.pdf.
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For non-GHG co-pollutants such as ozone, PM2.5, and
toxics, EPA has concluded that it is not practicable to determine
whether there would be disproportionately high and adverse human health
or environmental effects on minority and/or low income populations from
this proposed rule.
J. Statutory Provisions and Legal Authority
Statutory authority for the vehicle controls proposed today is
found in section 202(a) (which authorizes standards for emissions of
pollutants from new motor vehicles which emissions cause or contribute
to air pollution which may reasonably be anticipated to endanger public
health or welfare), 202(d), 203-209, 216, and 301 of the Clean Air Act,
42 U.S.C. 7521(a), 7521(d), 7522, 7523, 7524, 7525, 7541, 7542, 7543,
7550, and 7601. Statutory authority for EPA to establish CAFE test
procedures is found in section 32904(c) of the Energy Policy and
Conservation Act, 49 U.S.C. section 32904(c).
IV. NHTSA Proposed Rule for Passenger Car and Light Truck CAFE
Standards for Model Years 2017-2025
A. Executive Overview of NHTSA Proposed Rule
1. Introduction
The National Highway Traffic Safety Administration (NHTSA) is
proposing Corporate Average Fuel Economy (CAFE) standards for passenger
automobiles (passenger cars) and nonpassenger automobiles (light
trucks) for model years (MY) 2017-2025. NHTSA's proposed CAFE standards
would require passenger cars and light trucks to meet an estimated
combined average of 49.6 mpg in MY 2025. This represents an average
annual increase of
[[Page 75164]]
4 percent from the estimated 34.4 mpg combined fuel economy level
expected in MY 2016. Due to these proposed standards, we project total
fuel savings of approximately 173 billion gallons over the lifetimes of
the vehicles sold in model years 2017-2025, with corresponding net
societal benefits of over $358 billion using a 3 percent discount
rate,\600\ or $262 billion using a 7 percent discount rate.
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\600\ This value is based on what NHTSA refers to as ``Reference
Case'' inputs, which are based on the assumptions that NHTSA has
employed for its main analysis (as opposed to sensitivity analyses
to examine the effect of variations in the assumptions on costs and
benefits). The Reference Case inputs include fuel prices based on
the AEO 2011 Reference Case, a 3 percent and a 7 percent discount
rate, a 10 percent rebound effect, a value for the social cost of
carbon (SCC) of $22/metric ton CO2 (in 2010, rising to
$45/metric ton in 2050, at a 3 percent discount rate), etc. For a
full listing of the Reference Case input assumptions, see Section
IV.C.3 below.
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While NHTSA has been setting fuel economy standards since the
1970s, as discussed in Section I, NHTSA's proposed MYs 2017-2025 CAFE
standards are part of a National Program made up of complementary
regulations by NHTSA and the Environmental Protection Agency. Today's
proposed standards build upon the success of the first phase of the
National Program, finalized on May 7, 2010, in which NHTSA and EPA set
coordinated CAFE and greenhouse gas (GHG) standards for MYs 2012-2016
passenger cars and light trucks. Because of the very close relationship
between improving fuel economy and reducing carbon dioxide
(CO2) tailpipe emissions, a large majority of the projected
benefits are achieved jointly with EPA's GHG rule, described in detail
above in Section III of this preamble. These proposed CAFE standards
are consistent with the President's National Fuel Efficiency Policy
announcement of May 19, 2009, which called for harmonized rules for all
automakers, instead of three overlapping and potentially inconsistent
requirements from DOT, EPA, and the California Air Resources Board. And
finally, the proposed CAFE standards and the analysis supporting them
also respond to President's Obama's May 2010 memorandum requesting the
agencies to develop, through notice and comment rulemaking, a
coordinated National Program for passenger cars and light trucks for
MYs 2017 to 2025.
2. Why does NHTSA set CAFE standards for passenger cars and light
trucks?
Improving vehicle fuel economy has been long and widely recognized
as one of the key ways of achieving energy independence, energy
security, and a low carbon economy.\601\ The significance accorded to
improving fuel economy reflects several factors. Conserving energy,
especially reducing the nation's dependence on petroleum, benefits the
U.S. in several ways. Improving energy efficiency has benefits for
economic growth and the environment, as well as other benefits, such as
reducing pollution and improving security of energy supply. More
specifically, reducing total petroleum use decreases our economy's
vulnerability to oil price shocks. Reducing dependence on oil imports
from regions with uncertain conditions enhances our energy security.
Additionally, the emission of CO2 from the tailpipes of cars
and light trucks due to the combustion of petroleum is one of the
largest sources of U.S. CO2 emissions.\602\ Using vehicle
technology to improve fuel economy, and thereby reducing tailpipe
emissions of CO2, is one of the three main measures for
reducing those tailpipe emissions of CO2.\603\ The two other
measures for reducing the tailpipe emissions of CO2 are
switching to vehicle fuels with lower carbon content and changing
driver behavior, i.e., inducing people to drive less.
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\601\ Among the reports and studies noting this point are the
following:
John Podesta, Todd Stern and Kim Batten, ``Capturing the Energy
Opportunity; Creating a Low-Carbon Economy,'' Center for American
Progress (November 2007), pp. 2, 6, 8, and 24-29, available at:
http://www.americanprogress.org/issues/2007/11/pdf/energy_chapter.pdf (last accessed Sept. 24, 2011).
Sarah Ladislaw, Kathryn Zyla, Jonathan Pershing, Frank
Verrastro, Jenna Goodward, David Pumphrey, and Britt Staley, ``A
Roadmap for a Secure, Low-Carbon Energy Economy; Balancing Energy
Security and Climate Change,'' World Resources Institute and Center
for Strategic and International Studies (January 2009), pp. 21-22;
available at: http://pdf.wri.org/secure_low_carbon_energy_economy_roadmap.pdf (last accessed Sept. 24, 2011).
Alliance to Save Energy et al., ``Reducing the Cost of
Addressing Climate Change Through Energy Efficiency'' (2009),
available at: http://www.aceee.org/files/pdf/white-paper/ReducingtheCostofAddressingClimateChange_synopsis.pdf (last
accessed Sept. 24, 2011).
John DeCicco and Freda Fung, ``Global Warming on the Road; The
Climate Impact of America's Automobiles,'' Environmental Defense
(2006) pp. iv-vii; available at: http://www.edf.org/sites/default/files/5301_Globalwarmingontheroad_0.pdf (last accessed Sept. 24,
2011).
``Why is Fuel Economy Important?,'' a Web page maintained by the
Department of Energy and Environmental Protection Agency, available
at http://www.fueleconomy.gov/feg/why.shtml (last accessed Sept. 24,
2011);
Robert Socolow, Roberta Hotinski, Jeffery B. Greenblatt, and
Stephen Pacala, ``Solving The Climate Problem: Technologies
Available to Curb CO2 Emissions,'' Environment, volume
46, no. 10, 2004, pages 8-19, available at: http://www.princeton.edu/mae/people/faculty/socolow/ENVIRONMENTDec2004issue.pdf (last accessed Sept. 24, 2011).
\602\ EPA Inventory of U.S. Greenhouse Gas Emissions and Sinks:
1990-2008 (April 2010), pp. ES-5, ES-8, and 2-17. Available at
http://www.epa.gov/climatechange/emissions/usgginv_archive.html
(last accessed Sept. 25, 2011).
\603\ Podesta et al., p. 25; Ladislaw et al. p. 21; DeCicco et
al. p. vii; ``Reduce Climate Change, a Web page maintained by the
Department of Energy and Environmental Protection Agency at http://www.fueleconomy.gov/feg/climate.shtml (last accessed Sept. 24,
2011).
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Reducing Petroleum Consumption To Improve Energy Security and Save the
U.S. Money
In 1975, Congress enacted the Energy Policy and Conservation Act
(EPCA), mandating that NHTSA establish and implement a regulatory
program for motor vehicle fuel economy to meet the various facets of
the need to conserve energy, including ones having energy independence
and security, environmental, and foreign policy implications. The need
to reduce energy consumption is even more crucial today than it was
when EPCA was enacted. U.S. energy consumption has been outstripping
U.S. energy production at an increasing rate. Improving our energy and
national security by reducing our dependence on foreign oil has been a
national objective since the first oil price shocks in the 1970s. Net
petroleum imports accounted for approximately 51 percent of U.S.
petroleum consumption in 2009.\604\ World crude oil production is
highly concentrated, exacerbating the risks of supply disruptions and
price shocks as the recent unrest in North Africa and the Persian Gulf
highlights. The export of U.S. assets for oil imports continues to be
an important component of U.S. trade deficits. Transportation accounted
for about 71 percent of U.S. petroleum consumption in 2009.\605\ Light-
duty vehicles account for about 60 percent of transportation oil use,
which means that they alone account for about 40 percent of all U.S.
oil consumption.
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\604\ Energy Information Administration, ``How dependent are we
on foreign oil?'' Available at http://www.eia.gov/energy_in_brief/foreign_oil_dependence.cfm (last accessed August 28, 2011).
\605\ Energy Information Administration, Annual Energy Outlook
2011, ``Oil/Liquids.'' Available at http://www.eia.gov/forecasts/aeo/MT_liquidfuels.cfm (last accessed August 28, 2011).
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Gasoline consumption in the U.S. has historically been relatively
insensitive to fluctuations in both price and consumer income, and
people in most parts of the country tend to view gasoline consumption
as a non-discretionary expense. Thus, when gasoline's share in consumer
expenditures rises, the public experiences fiscal distress. Recent
tight
[[Page 75165]]
global oil markets led to prices over $100 per barrel, with gasoline
reaching as high as $4 per gallon in many parts of the U.S., causing
financial hardship for many families and businesses. This fiscal
distress can, in some cases, have macroeconomic consequences for the
economy at large.
Additionally, since U.S. oil production is only affected by
fluctuations in prices over a period of years, any changes in petroleum
consumption (as through increased fuel economy levels for the on-road
fleet) largely flow into changes in the quantity of imports. Since
petroleum imports account for about 2 percent of GDP, increases in oil
imports can create a discernible fiscal drag. As a consequence,
measures that reduce petroleum consumption, like fuel economy
standards, will directly benefit the balance-of-payments account, and
strengthen the U.S. economy to some degree. And finally, U.S. foreign
policy has been affected by decades by rising U.S. and world dependency
on crude oil as the basis for modern transportation systems, although
fuel economy standards have at best an indirect impact on U.S. foreign
policy.
Reducing Petroleum Consumption To Reduce Climate Change Impacts
CO2 is the natural by-product of the combustion of fuel
to power motor vehicles. The more fuel-efficient a vehicle is, the less
fuel it needs to burn to travel a given distance. The less fuel it
burns, the less CO2 it emits in traveling that
distance.\606\ Since the amount of CO2 emissions is
essentially constant per gallon combusted of a given type of fuel, the
amount of fuel consumption per mile is closely related to the amount of
CO2 emissions per mile. Motor vehicles are the second
largest GHG-emitting sector in the U.S. after electricity generation,
and accounted for 27 percent of total U.S. GHG emissions in 2008.\607\
Concentrations of greenhouse gases are at unprecedented levels compared
to the recent and distant past, which means that fuel economy
improvements to reduce those emissions are a crucial step toward
addressing the risks of global climate change. These risks are well
documented in Section III of this notice, and in NHTSA's draft
Environmental Impact Statement (DEIS) accompanying these proposed
standards.
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\606\ Panel on Policy Implications of Greenhouse Warming,
National Academy of Sciences, National Academy of Engineering,
Institute of Medicine, ``Policy Implications of Greenhouse Warming:
Mitigation, Adaptation, and the Science Base,'' National Academies
Press, 1992, at 287. Available at http://www.nap.edu/catalog.php?record_id=1605 (last accessed Sept. 25, 2011).
\607\ EPA Inventory of U.S. Greenhouse Gas Emissions and Sinks:
1990-2008 (April 2010), p. 2-17. Available at http://www.epa.gov/climatechange/emissions/usgginv_archive.html (last accessed Sept.
25, 2011).
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Fuel economy gains since 1975, due both to the standards and to
market factors, have resulted in saving billions of barrels of oil and
avoiding billions of metric tons of CO2 emissions. In
December 2007, Congress enacted the Energy Independence and Security
Act (EISA), amending EPCA to require substantial, continuing increases
in fuel economy. NHTSA thus sets CAFE standards today under EPCA, as
amended by EISA, in order to help the U.S. passenger car and light
truck fleet save fuel to promote energy independence, energy security,
and a low carbon economy.
3. Why is NHTSA proposing CAFE standards for MYs 2017-2025 now?
a. President's Memorandum
During the public comment period for the MY 2012-2016 proposed
rulemaking, many stakeholders encouraged NHTSA and EPA to begin working
toward standards for MY 2017 and beyond in order to maintain a single
nationwide program. After the publication of the final rule
establishing MYs 2012-2016 CAFE and GHG standards, President Obama
issued a Memorandum on May 21, 2010 requesting that NHTSA, on behalf of
the Department of Transportation, and EPA work together to develop a
national program for model years 2017-2025.\608\ Specifically, he
requested that the agencies develop ``* * * a coordinated national
program under the CAA [Clean Air Act] and the EISA [Energy Independence
and Security Act of 2007] to improve fuel efficiency and to reduce
greenhouse gas emissions of passenger cars and light-duty trucks of
model years 2017-2025.'' The President recognized that our country
could take a leadership role in addressing the global challenges of
improving energy security and reducing greenhouse gas pollution,
stating that ``America has the opportunity to lead the world in the
development of a new generation of clean cars and trucks through
innovative technologies and manufacturing that will spur economic
growth and create high-quality domestic jobs, enhance our energy
security, and improve our environment.''
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\608\ The Presidential Memorandum is found at: http://www.whitehouse.gov/the-press-office/presidential-memorandum-regarding-fuel-efficiency-standards. For the reader's reference, the
President also requested the Administrators of EPA and NHTSA to
issue joint rules under the CAA and EISA to establish fuel
efficiency and greenhouse gas emissions standards for commercial
medium-and heavy-duty on-highway vehicles and work trucks beginning
with the 2014 model year. The agencies recently promulgated final
GHG and fuel efficiency standards for heavy duty vehicles and
engines for MYs 2014-2018. 76 FR 57106 (September 15, 2011).
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The Presidential Memorandum stated ``The program should also seek
to achieve substantial annual progress in reducing transportation
sector greenhouse gas emissions and fossil fuel consumption, consistent
with my Administration's overall energy and climate security goals,
through the increased domestic production and use of existing,
advanced, and emerging technologies, and should strengthen the industry
and enhance job creation in the United States.'' Among other things,
the agencies were tasked with researching and then developing standards
for MYs 2017 through 2025 that would be appropriate and consistent with
EPA's and NHTSA's respective statutory authorities, in order to
continue to guide the automotive sector along the road to reducing its
fuel consumption and GHG emissions, thereby ensuring corresponding
energy security and environmental benefits. Several major automobile
manufacturers and CARB sent letters to EPA and NHTSA in support of a
MYs 2017 to 2025 rulemaking initiative as outlined in the President's
May 21, 2010 announcement.\609\ The agencies began working immediately
on the next phase of the National Program, work which has culminated in
the standards proposed in this notice for MYs 2017-2025.
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\609\ These commitment letters in response to the May 21, 2010
Presidential Memorandum are available at http://www.epa.gov/otaq/climate/proposedregs.htm#cl; and http://www.nhtsa.gov/Laws+&+Regulations/CAFE+-+Fuel+Economy/Stakeholder+Commitment+Letters (last accessed August 28, 2011).
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b. Benefits of Continuing the National Program
The National Program is both needed and possible because the
relationship between improving fuel economy and reducing CO2
tailpipe emissions is a very close one. In the real world, there is a
single pool of technologies for reducing fuel consumption and
CO2 emissions. Using these technologies in the way that
minimizes fuel consumption also minimizes CO2 emissions.
While there are emission control technologies that can capture or
destroy the pollutants that are produced by imperfect combustion of
fuel (e.g., carbon monoxide), there are at present no such technologies
for CO2. In fact, the only way at present to reduce tailpipe
emissions of CO2 is by reducing
[[Page 75166]]
fuel consumption. The National Program thus has dual benefits: it
conserves energy by improving fuel economy, as required of NHTSA by
EPCA and EISA; in the process, it necessarily reduces tailpipe
CO2 emissions consonant with EPA's purposes and
responsibilities under the Clean Air Act.
Additionally, by setting harmonized Federal standards to regulate
both fuel economy and greenhouse gas emissions, the agencies are able
to provide a predictable regulatory framework for the automotive
industry while preserving the legal authorities of NHTSA, EPA, and the
State of California. Consistent, harmonized, and streamlined
requirements under the National Program, both for MYs 2012-2016 and for
MYs 2017-2025, hold out the promise of continuing to deliver energy and
environmental benefits, cost savings, and administrative efficiencies
on a nationwide basis that might not be available under a less
coordinated approach. The National Program makes it possible for the
standards of two different Federal agencies and the standards of
California and other ``Section 177'' states to act in a unified fashion
in providing these benefits. A harmonized approach to regulating
passenger car and light truck fuel economy and GHG emissions is
critically important given the interdependent goals of addressing
climate change and ensuring energy independence and security.
Additionally, a harmonized approach would help to mitigate the cost to
manufacturers of having to comply with multiple sets of Federal and
State standards.
One aspect of this phase of the National Program that is unique for
NHTSA, however, is that the passenger car and light truck CAFE
standards for MYs 2022-2025 must be conditional, while EPA's standards
for those model years will be legally binding when adopted in this
round. EISA requires NHTSA to issue CAFE standards for ``at least 1,
but not more than 5, model years.'' \610\ To maintain the harmonization
benefits of the National Program, NHTSA will therefore propose and
adopt standards for all 9 model years from 2017-2025, but the last 4
years of standards will not be legally binding as part of this
rulemaking. The passenger car and light truck CAFE standards for MYs
2022-2025 will be determined with finality in a subsequent, de novo
notice and comment rulemaking conducted in full compliance with EPCA/
EISA and other applicable law--beyond simply reviewing the analysis and
findings in the present rulemaking to see whether they are still
accurate and applicable, and taking a fresh look at all relevant
factors based on the best and most current information available at
that future time.
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\610\ 49 U.S.C. 32902(b)(3)(B).
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To facilitate that future effort, NHTSA and EPA will conduct a
comprehensive mid-term evaluation. Up to date information will be
developed and compiled for the evaluation, through a collaborative,
robust, and transparent process, including notice and comment. The
agencies fully expect to conduct the mid-term evaluation in close
coordination with the California Air Resources Board (CARB), consistent
with the agencies' commitment to maintaining a single national
framework for regulation of fuel economy and GHG emissions.\611\ Prior
to beginning NHTSA's rulemaking process and EPA's mid-term evaluation,
the agencies will jointly prepare a draft Technical Assessment Report
(TAR) to examine afresh the issues and, in doing so, conduct similar
analyses and projections as those considered in the current rulemaking,
including technical and other analyses and projections relevant to each
agency's authority to set standards as well as any relevant new issues
that may present themselves. The agencies will provide an opportunity
for public comment on the draft TAR, and appropriate peer review will
be performed of underlying analyses in the TAR. The assumptions and
modeling underlying the TAR will be available to the public, to the
extent consistent with law. The draft TAR is expected to be issued no
later than November 15, 2017. After the draft TAR and public comment,
the agencies will consult and coordinate as NHTSA develops its NPRM.
NHTSA will ensure that the subsequent final rule will be timed to
provide sufficient lead time for industry to make whatever changes to
their products that the rulemaking analysis deems maximum feasible
based on the new information available. At the very latest, NHTSA will
complete its subsequent rulemaking on the standards with at least 18
months lead time as required by EPCA,\612\ but additional lead time may
be provided.
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\611\ The agencies also fully expect that any adjustments to the
standards as a result of the mid-term evaluation process from the
levels enumerated in the current rulemaking will be made with the
participation of CARB and in a manner that continues the
harmonization of state and Federal vehicle standards.
\612\ 49 U.S.C. 32902(a).
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B. Background
1. Chronology of Events Since the MY 2012-2016 Final Rule Was Issued
Section I above covers the chronology of events in considerable
detail, and we refer the reader there.
2. How has NHTSA developed the proposed CAFE standards since the
President's announcement?
The CAFE standards proposed in this NPRM are based on much more
analysis conducted by the agencies since July 29, including in-depth
modeling analysis by DOT/NHTSA to support the proposed CAFE standards,
and further refinement of a number of our baseline, technology, and
economic assumptions used to evaluate the proposed standards and their
impacts. This NPRM, the draft joint TSD, and NHTSA's PRIA and EPA's
DRIA contain much more information about the analysis underlying these
proposed standards. The following sections provide the basis for
NHTSA's proposed passenger car and light truck CAFE standards for MYs
2017-2025, the standards themselves, the estimated impacts of the
proposed standards, and much more information about the CAFE program
relevant to the 2017-2025 timeframe.
C. Development and Feasibility of the Proposed Standards
1. How was the baseline vehicle fleet developed?
a. Why do the agencies establish a baseline and reference vehicle
fleet?
As also discussed in Section II.B above, in order to determine what
levels of stringency are feasible in future model years, the agencies
must project what vehicles will exist in those model years, and then
evaluate what technologies can feasibly be applied to those vehicles in
order to raise their fuel economy and lower their CO2
emissions. The agencies therefore established a ``baseline'' vehicle
fleet representing those vehicles, based on the best available
transparent information. The agencies then developed a ``reference''
fleet, projecting the baseline fleet sales into MYs 2017-2025 and
accounting for the effect that the MY 2012-2016 CAFE standards have on
the baseline fleet.\613\ This
[[Page 75167]]
reference fleet is then used for comparisons of technologies'
incremental cost and effectiveness, as well as for other relevant
comparisons in the rule.
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\613\ In order to calculate the impacts of the proposed future
GHG and CAFE standards, it is necessary to estimate the composition
of the future vehicle fleet absent those proposed standards in order
to conduct comparisons. The first step in this process was to
develop a fleet based on model year 2008 data. This 2008-based fleet
includes vehicle sales volumes, GHG/fuel economy performance, and
contains a listing of the base technologies on every 2008 vehicle
sold. The second step was to project that 2008-based fleet volume
into MYs 2017-2025. This is called the reference fleet, and it
represents the fleet volumes (but, until later steps, not levels of
technology) that the NHTSA and EPA expect would exist in MYs 2017-
2025 absent any change due to regulation in 2017-2025.
After determining the reference fleet, a third step is needed to
account for technologies (and corresponding increases in cost and
reductions in fuel consumption and CO2 emissions) that
could be added to MY 2008-technology vehicles in the future, taking
into previously-promulgated standards, and assuming MY 2016
standards are extended through MY2025. NHTSA accomplished this by
using the CAFE model to add technologies to that MY 2008-based
market forecast such that each manufacturer's car and truck CAFE and
average CO2 levels reflect baseline standards. The
model's output, the reference case (or adjusted baseline, or no-
action alternative), is the light-duty fleet estimated to exist in
MYs 2017-2025 without new GHG/CAFE standards covering MYs 2017-2025.
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b. What data did the agencies use to construct the baseline, and how
did they do so?
As explained in the draft joint TSD, both agencies used a baseline
vehicle fleet constructed beginning with EPA fuel economy certification
data for the 2008 model year, the most recent model year for which
final data is currently available from manufacturers. These data were
used as the source for MY 2008 production volumes and some vehicle
engineering characteristics, such as fuel economy compliance ratings,
engine sizes, numbers of cylinders, and transmission types.
For this NPRM, NHTSA and EPA chose again to use MY 2008 vehicle
data as the basis of the baseline fleet. MY 2008 is now the most recent
model year for which the industry had what the agencies would consider
to be ``normal'' sales. Complete MY 2009 data is now available for the
industry, but the agencies believe that the model year was disrupted by
the economic downturn and the bankruptcies of both General Motors and
Chrysler. CAFE compliance data shows that there was a significant
reduction in the number of vehicles sold by both companies and by the
industry as a whole. These abnormalities led the agencies to conclude
that MY 2009 data was likely not representative for projecting the
future fleet for purposes of this analysis. While MY 2010 data is
likely more representative for projecting the future fleet, it was not
complete and available in time for it to be used for the NPRM analysis.
Therefore, for purposes of the NPRM analysis, NHTSA and EPA chose to
use MY 2008 CAFE compliance data for the baseline since it was the
latest, most representative transparent data set that we had available.
However, the agencies plan to use the MY 2010 data, if available, to
develop an updated market forecast for use in the final rule. If and
when the MY 2010 data becomes available, NHTSA will place a copy of
this data into its rulemaking docket.
Some information important for analyzing new CAFE standards is not
contained in the EPA fuel economy certification data. EPA staff
estimated vehicle wheelbase and track widths using data from
Motortrend.com and Edmunds.com. This information is necessary for
estimating vehicle footprint, which is required for the analysis of
footprint-based standards.
Considerable additional information regarding vehicle engineering
characteristics is also important for estimating the potential to add
new technologies in response to new CAFE standards. In general, such
information helps to avoid ``adding'' technologies to vehicles that
already have the same or a more advanced technology. Examples include
valvetrain configuration (e.g., OHV, SOHC, DOHC), presence of cylinder
deactivation, and fuel delivery (e.g., MPFI, SIDI). To the extent that
such engineering characteristics were not available in certification
data, EPA staff relied on data published by Ward's Automotive,
supplementing this with information from Internet sites such as
Motortrend.com and Edmunds.com. NHTSA staff also added some more
detailed engineering characteristics (e.g., type of variable valve
timing) using data available from ALLDATA[reg] Online. Combined with
the certification data, all of this information yielded the MY 2008
baseline vehicle fleet. NHTSA also reviewed information from
manufacturers' confidential product plans submitted to the agency, but
did not rely on that information for developing the baseline or
reference fleets.
After the baseline was created the next step was to project the
sales volumes for 2017-2025 model years. EPA used projected car and
truck volumes for this period from Energy Information Administration's
(EIA's) 2011 Interim Annual Energy Outlook (AEO).\614\ However, AEO
projects sales only at the car and truck level, not at the manufacturer
and model-specific level, which are needed in order to estimate the
effects new standards will have on individual manufacturers. Therefore,
EPA purchased data from CSM-Worldwide and used their projections of the
number of vehicles of each type predicted to be sold by manufacturers
in 2017-2025.\615\ This provided the year-by-year percentages of cars
and trucks sold by each manufacturer as well as the percentages of each
vehicle segment. Using these percentages normalized to the AEO
projected volumes then provided the manufacturer-specific market share
and model-specific sales for model years 2011-2016.
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\614\ Department of Energy, Energy Information Administration,
Annual Energy Outlook (AEO) 2011, Early Release. Available at http://www.eia.gov/forecasts/aeo/. Both agencies regard AEO a credible
source not only of such forecasts, but also of many underlying
forecasts, including forecasts of the size of the future light
vehicle market. The agencies used the early release version of AEO
2011 and confirmed later that changes reflected in the final version
were insignificant with respect to the relative volumes of passenger
cars and light trucks.
\615\ The agencies explain in Chapter I of the draft Joint TSD
why data from CSM was chosen for creating the baseline for this
rulemaking.
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The processes for constructing the MY 2008 baseline vehicle fleet
and subsequently adjusting sales volumes to construct the MY 2017-2025
baseline vehicle fleet are presented in detail in Chapter 1 of the
Joint Technical Support Document accompanying today's proposed rule.
The agencies assume that without adoption of the proposed rule,
that during the 2017-2025 period, manufacturers will not improve fuel
economy levels beyond the levels required in the MY 2016 standards.
However, it is possible that manufacturers may be driven by market
forces to raise the fuel economy of their fleets. The recently-adopted
fuel economy and environment labels (``window stickers''), for example,
may make consumers more aware of the benefits of higher fuel economy,
and may cause them to demand more fuel-efficient vehicles during that
timeframe. Moreover, the agencies' analysis indicates that some fuel-
saving technologies may save money for manufacturers. In Chapter X of
the PRIA, NHTSA examines the impact of an alternative ``market-driven''
baseline, which allows for some increases in fuel economy due to
``voluntary overcompliance'' beyond the MY 2016 levels. NHTSA seeks
comment on what assumptions about fuel economy increases are most
likely to accurately predict what would happen in the absence of the
proposed rule.
NHTSA invites comment on the process used to develop the market
forecast, and on whether the agencies should consider alternative
approaches to producing a forecast at the level of detail we need for
modeling. If commenters wish to offer alternatives, we ask that they
address how manufacturers' future fleets would be
[[Page 75168]]
defined in terms of specific products, and the sales volumes and
technical characteristics (e.g., fuel economy, technology content,
vehicle weight, and other engineering characteristics) of those
products. The agency also invites comment regarding what sensitivity
analyses--if any--we should do related to the market forecast. For
example, should the agency evaluate the extent to which its analysis is
sensitive to projections of the size of the market, manufacturers'
respective market shares, the relative growth of different market
segments, and or the relative growth of the passenger car and light
truck markets? If so, how would commenters suggest that we do that?
c. How is the development of the baseline fleet for this rule different
from the baseline fleet that NHTSA used for the MY 2012-2016 (May 2010)
final rule?
The development of the baseline fleet for this rulemaking utilizes
the same procedures used in the development of the baseline fleet for
the MY 2012-2016 rulemaking. Compared to that rulemaking, the change in
the baseline is much less dramatic--the MY 2012-2016 rulemaking was the
first rulemaking in which NHTSA did not use manufacturer product plan
data to develop the baseline fleet,\616\ so evaluating the difference
between the baseline fleet used in the MY 2011 final rule and in the MY
2012-2016 rulemaking was informative at that time regarding some of the
major impacts of that switch. In this proposal, we are using basically
the same MY 2008 based file as the starting point in the MY 2012-2016
analysis, and simply using an updated AEO forecast and an updated CSM
forecast. Of those, most differences are in input assumptions rather
than the basic approach and methodology. These include changes in
various macroeconomic assumptions underlying the AEO and CSM forecasts
and the use of results obtained by using DOE's National Energy Modeling
System (NEMS) to repeat the AEO 2011 analysis without forcing increased
passenger car volumes, and without assuming post-MY 2016 increases in
the stringency of CAFE standards.\617\
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\616\ The agencies' reasons for not relying on product plan data
for the development of the baseline fleet were discussed in the
Regulatory Impact Analysis for the MYs 2012-2016 rulemaking and at
74 FR 49487-89. While a baseline developed using publicly and
commercially available sources has both advantages and disadvantages
relative to a baseline developed using manufacturers' product plans,
NHTSA currently concludes, as it did in the course of that prior
rulemaking, that the advantages outweigh the disadvantages.
Commenters generally supported the more transparent approach
employed in the MYs 2012-2016 rulemaking.
\617\ Similar to the analyses supporting the MYs 2012-2016
rulemaking, the agencies have used the Energy Information
Administration's (EIA's) National Energy Modeling System (NEMS) to
estimate the future relative market shares of passenger cars and
light trucks. However, NEMS methodology includes shifting vehicle
sales volume, starting after 2007, away from fleets with lower fuel
economy (the light-truck fleet) towards vehicles with higher fuel
economies (the passenger car fleet) in order to facilitate
compliance with CAFE and GHG MYs 2012-2016 standards. Because we use
our market projection as a baseline relative to which we measure the
effects of new standards, and we attempt to estimate the industry's
ability to comply with new standards without changing product mix,
the Interim AEO 2011-projected shift in passenger car market share
as a result of required fuel economy improvements creates a
circularity. Therefore, for the current analysis, the agencies
developed a new projection of passenger car and light truck sales
shares by running scenarios from the Interim AEO 2011 reference case
that first deactivate the above-mentioned sales-volume shifting
methodology and then hold post-2017 CAFE standards constant at MY
2016 levels. Incorporating these changes reduced the projected
passenger car share of the light vehicle market by an average of
about 5 percent during 2017-2025. NHTSA and EPA refer to this as the
``Unforced Reference Case.''
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Another change in the baseline fleet from the last rulemaking
involved our redefinition of the list of manufacturers to account for
realignment and ownership changes taking place within the industry. The
reported results supporting this rulemaking recognize that Volvo
vehicles are no longer a part of Ford, but are reported as a separate
company, Geely; that Saab vehicles are no longer part of GM, but are
reported as part of Spyker which purchased Saab from GM in 2010; and
that Chrysler, along with Ferrari and Maserati, are reported as Fiat.
In addition, low volume specialty manufacturers omitted from the
analysis supporting the MY 2012-2016 rulemaking have been included in
the analysis supporting this rulemaking. These include Aston Martin,
Lotus, and Tesla.
d. How is this baseline different quantitatively from the baseline that
NHTSA used for the MY 2012-2016 (May 2010) final rule?
As discussed above, the current baseline was developed from
adjusted MY 2008 compliance data and covers MY 2017-2025. This section
describes, for the reader's comparison, some of the differences between
the current baseline and the MY 2012-2016 CAFE rule baseline. This
comparison provides a basis for understanding general characteristics
and measures of the difference between the two baselines. The current
baseline, while developed using the same methods as the baseline used
for MY 2012-2016 rulemaking, reflects updates to the underlying
commercially-available forecast of manufacturer and market segment
shares of the future passenger car and light truck market. Again, the
differences are in input assumptions rather than the basic approach and
methodology. It also includes changes in various macroeconomic
assumptions underlying the AEO forecasts and the use of the AEO
Unforced Reference Case. Another change in the market input data from
the last rulemaking involved our redefinition of the list of
manufacturers to account for realignment taking place within the
industry.
Estimated vehicle sales:
The sales forecasts, based on the Energy Information
Administration's (EIA's) Early Annual Energy Outlook for 2011 (Interim
AEO 2011), used in the current baseline indicate that the total number
of light vehicles expected to be sold during MYs 2012-2016 is 79
million, or about 15.8 million vehicles annually. NHTSA's MY 2012-2016
final rule forecast, based on AEO 2010, of the total number of light
vehicles likely to be sold during MY 2012 through MY 2016 was 80
million, or about 16 million vehicles annually. Light trucks are
expected to make up 37 percent of the MY 2016 baseline market forecast
in the current baseline, compared to 34 percent of the baseline market
forecast in the MY 2012-2016 final rule. These changes in both the
overall size of the light vehicle market and the relative market shares
of passenger cars and light trucks reflect changes in the economic
forecast underlying AEO, changes in AEO's forecast of future fuel
prices, and use of the Unforced Reference Case.
Estimated manufacturer market shares:
These changes are reflected below in Table IV-1, which shows the
agency's sales forecasts for passenger cars and light trucks under the
current baseline and the MY 2012-2016 final rule. There has been a
general decrease in MY 2016 forecast overall sales (from AEO) and for
all manufacturers (reflecting CSM's forecast of manufacturers' market
shares), with the exception of Chrysler, when the current baseline is
compared to that used in the MY 2012-2016 rulemaking. There were no
significant shifts in manufacturers' market shares between the two
baselines. The effect of including the low volume specialty
manufacturers and accounting for known corporate realignments in the
current baseline appear to be negligible. For individual manufacturers,
there have been shifts in the shares of passenger car and light trucks,
as would
[[Page 75169]]
be expected given that the agency is relying on different underlying
assumptions as discussed above and in Chapter 1 of the joint TSD.
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\618\ Again, Aston Martin, Alfa Romeo, Ferrari, Maserati, Lotus
and Tesla were not included in the baseline of the MY 2012-2016
rulemaking; Volvo vehicles were reported under Ford and Saab
vehicles were reported under GM; and Chrysler was reported as a
separate company whereas now it is reported as part of Fiat and
includes Alfa Romeo, Ferrari, and Maserati.
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[[Page 75170]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.157
Estimated achieved fuel economy levels:
The current baseline market forecast shows industry-wide average
fuel economy levels somewhat lower in MY 2016 than shown in the
baseline market forecast for the MY 2012-2016 rulemaking. Under the
current baseline, average fuel economy for MY 2016 is 27.0 mpg, versus
27.3 mpg under the baseline in the MY 2012-2016 rulemaking. The 0.3 mpg
change relative to the MY 2012-2016 rulemaking's baseline is the result
of changes in the shares of passenger car
[[Page 75171]]
and light trucks in the MY 2016 market as noted above--more light
trucks generally equals lower average fuel economy--and not the result
of changes in the capabilities of the car and truck fleets.
These differences are shown in greater detail below in Table IV-2,
which shows manufacturer-specific CAFE levels (not counting FFV credits
that some manufacturers expect to earn) from the current baseline
versus the MY 2012-2016 rulemaking baseline for passenger cars and
light trucks. Table IV-3 shows the combined averages of these planned
CAFE levels in the respective baseline fleets. These tables demonstrate
that there are no significant differences in CAFE for either passenger
cars or light trucks at the manufacturer level between the current
baseline and the MY 2012-2016 rulemaking baseline. The differences
become more significant at the manufacturer level when combined CAFE
levels are considered. Here we see a general decline in CAFE at the
manufacturer level due to the increased share of light trucks. Because
the agencies have, as for the MY 2012-2016 rulemaking, based this
market forecast on vehicles in the MY 2008 fleet, these changes in CAFE
levels reflect changes in vehicle mix, not changes in the fuel economy
achieved by individual vehicle models.
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\619\ Again, Aston Martin, Alfa Romeo, Ferrari, Maserati, Lotus
and Tesla were not included in the baseline of the MY 2012-2016
rulemaking; Volvo vehicles were reported under Ford and Saab
vehicles were reported under GM; and Chrysler was reported as a
separate company whereas now it is reported as part of Fiat and
includes Alfa Romeo, Ferrari, and Maserati.
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\620\ Again, Aston Martin, Alfa Romeo, Ferrari, Maserati, Lotus
and Tesla were not included in the baseline of the MY 2012-2016
rulemaking; Volvo vehicles were reported under Ford and Saab
vehicles were reported under GM; and Chrysler was reported as a
separate company whereas now it is reported as part of Fiat and
includes Alfa Romeo, Ferrari, and Maserati.
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e. How does manufacturer product plan data factor into the baseline
used in this rule?
In December 2010, NHTSA requested that manufacturers provide
information regarding future product plans, as well as information
regarding the context for those plans (e.g., estimates of future fuel
prices), and estimates of the future availability, cost, and efficacy
of fuel-saving technologies.\621\ The purpose of this request was to
acquire updated information regarding vehicle manufacturers' future
product plans to assist the agency in assessing what corporate CAFE
standards should be established for passenger cars and light trucks
manufactured in model years 2017 and beyond. The request was being
issued in preparation for today's joint NPRM.
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\621\ 75 FR 80430.
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NHTSA indicated that it requested information for MYs 2010-2025
primarily as a basis for subsequent discussions with individual
manufacturers regarding their capabilities for the MYs 2017-2025 time
frame as it worked to develop today's NPRM. NHTSA indicated that the
information received would supplement other information to be used by
NHTSA to develop a realistic forecast of the vehicle market in MY 2017
and beyond, and to evaluate what technologies may feasibly be applied
by manufacturers to
[[Page 75174]]
achieve compliance with potential future standards. NHTSA further
indicated that information regarding later model years could help the
agency gain a better understanding of how manufacturers' plans through
MY 2025 relate to their longer-term expectations regarding foreseeable
regulatory requirements, market trends, and prospects for more advanced
technologies.
NHTSA also indicated that it would consider information regarding
the model years requested when considering manufacturers' planned
schedules for redesigning and freshening their products, in order to
examine how manufacturers anticipate tying technology introduction to
product design schedules. In addition, the agency requested information
regarding manufacturers' estimates of the future vehicle population,
and fuel economy improvements and incremental costs attributed to
technologies reflected in those plans.
Given the importance that responses to this request for comment may
have in informing NHTSA's proposed CAFE rulemaking, whether as part of
the basis for the standards or as an independent check on them, NHTSA
requested that commenters fully respond to each question, particularly
by providing information regarding the basis for technology costs and
effectiveness estimates.
We have already noted that in past CAFE rulemakings, NHTSA used
manufacturers' product plans--and other information--to build market
forecasts providing the foundation for the agency's rulemaking
analysis. This issue has been the subject of much debate over the past
several rulemakings since NHTSA began actively working on CAFE again
following the lifting of the appropriations riders in 2001. The agency
continues to believe that these market forecasts reflected the most
technically sound forecasts the agency could have then developed for
this purpose. Because the agency could not disclose confidential
business information in manufacturers' product plans, NHTSA provided
summarized information, such as planned CAFE levels and technology
application rates, rather than the fuel economy levels and technology
content of specific vehicle model types.
In preparing the MY 2012-2016 rule jointly with EPA, however, NHTSA
revisited this practice, and concluded that for that rulemaking, it was
important that all reviewers have equal access to all details of
NHTSA's analysis. NHTSA provided this level of transparency by
releasing not only the agency's CAFE modeling system, but also by
releasing all model inputs and outputs for the agency's analysis, all
of which are available on NHTSA's Web site at http://www.nhtsa.gov/fuel-economy. Therefore, NHTSA worked with EPA, as it did in preparing
for analysis supporting today's proposal, to build a market forecast
based on publicly- and commercially-available sources. NHTSA continues
to believe that the potential technical benefits of relying on
manufacturers' plans for future products are outweighed by the
transparency gained in building a market forecast that does not rely on
confidential business information, but also continues to find product
plan information to be an important point of reference for meetings
with individual manufacturers. We seek comment on what value
manufacturer product plan might have in the future, and whether it
continues to be useful to request manufacturer product plans to inform
rulemaking analyses, specifically the baseline forecast used in
rulemaking analyses.
f. What sensitivity analyses is NHTSA conducting on the baseline?
As discussed below in Section IV.G, when evaluating the potential
impacts of new CAFE standards, NHTSA considered the potential that,
depending on how the cost and effectiveness of available technologies
compare to the price of fuel, manufacturers would add more fuel-saving
technology than might be required solely for purposes of complying with
CAFE standards. This reflects that agency's consideration that there
could, in the future, be at least some market for fuel economy
improvements beyond the required MY 2016 CAFE levels. In this
sensitivity analysis, this causes some additional technology to be
applied, more so under baseline standards than under the more stringent
standards proposed today by the agency. Results of this sensitivity
analysis are summarized in Section IV.G and in NHTSA's PRIA
accompanying today's notice.
g. How else is NHTSA considering looking at the baseline for the final
rule?
Beyond the sensitivity analysis discussed above, NHTSA is also
considering developing and using a vehicle choice model to estimate the
extent to which sales volumes would shift in response to changes in
vehicle prices and fuel economy levels. As discussed IV.C.4, the agency
is currently sponsoring research directed toward developing such a
model. If that effort is successful, the agency will consider
integrating the model into the CAFE modeling system and using the
integrated system for future analysis of potential CAFE standards. If
the agency does so, we expect that the vehicle choice model would
impact estimated fleet composition not just under new CAFE standards,
but also under baseline CAFE standards.
2. How were the technology inputs developed?
As discussed above in Section II.E, for developing the technology
inputs for these proposed MYs 2017-2025 CAFE and GHG standards, the
agencies primarily began with the technology inputs used in the MYs
2012-2016 CAFE final rule and in the 2010 TAR. The agencies have also
updated information based on newly completed FEV tear down studies and
new vehicle simulation work conducted by Ricardo Engineering, both of
which were contracted by EPA. Additionally, the agencies relied on a
model developed by Argonne National Laboratory to estimate hybrid,
plug-in hybrid and electric vehicle battery costs. More detail is
available regarding how the agencies developed the technology inputs
for this proposal above in Section II.E, in Chapter 3 of the Joint TSD,
and in Section V of NHTSA's PRIA.
a. What technologies does NHTSA consider?
Section II.E.1 above describes the fuel-saving technologies
considered by the agencies that manufacturers could use to improve the
fuel economy of their vehicles during MYs 2017-2025. Many of the
technologies described in this section are readily available, well
known, and could be incorporated into vehicles once production
decisions are made. Other technologies, added for this rulemaking
analysis, are considered that are not currently in production, but are
beyond the initial research phase, under development and are expected
to be in production in the next 5-10 years. As discussed, the
technologies considered fall into five broad categories: engine
technologies, transmission technologies, vehicle technologies,
electrification/accessory technologies, and hybrid technologies. Table
IV-4 below lists all the technologies considered and provides the
abbreviations used for them in the CAFE model,\622\ as well as their
year of availability, which for purposes of NHTSA's analysis means the
first model year in the rulemaking
[[Page 75175]]
period that the CAFE model is allowed to apply a technology to a
manufacturer's fleet.\623\ ``Year of availability'' recognizes that
technologies must achieve a level of technical viability before they
can be implemented in the CAFE model, and are thus a means of
constraining technology use until such time as it is considered to be
technologically feasible. For a more detailed description of each
technology and their costs and effectiveness, we refer the reader to
Chapter 3 of the Joint TSD and Section V of NHTSA's PRIA.
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\622\ The abbreviations are used in this section both for
brevity and for the reader's reference if they wish to refer to the
expanded decision trees and the model input and output sheets, which
are available in Docket No. NHTSA-2010-0131 and on NHTSA's Web site.
\623\ A date of 2012 means the technology can be applied in all
model years, while a date of 2020 means the technology can only be
applied in model years 2020 through 2025.
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For purposes of this proposal and as discussed in greater detail in
the Joint TSD, NHTSA and EPA built upon the list of technologies used
by agencies for the MYs 2017-2025 CAFE and GHG standards. NHTSA and EPA
had additional technologies to the list that that the agencies expect
to be in production during the MYs 2017-2025 timeframe. These new
technologies included higher BMEP turbocharged and downsized engines,
advanced diesel engines, higher efficiency transmissions, additional
mass reduction levels, PHEVs, EVs, etc.
b. How did NHTSA determine the costs and effectiveness of each of
these technologies for use in its modeling analysis?
Building on cost estimates developed for the MYs 2012-2016 CAFE and
GHG final rule and the 2010 TAR, the agencies incorporated new cost and
effectiveness estimates for the new technologies being considered and
some of the technologies carried over from the MYs 2012-2016 final rule
and 2010 TAR. This joint work is reflected in Chapter 3 of the Joint
TSD and in Section II of this preamble, as summarized below. For more
detailed information on the effectiveness and cost of fuel-saving
technologies, please refer to Chapter 3 of the Joint TSD and Section V
of NHTSA's PRIA.
For this proposal the FEV tear down work was expanded to include an
8-speed DCT, a power-split hybrid, which was used to determine a P2
hybrid cost, and a mild hybrid with stop-start technology.
Additionally, battery costs have been revised using Argonne National
Laboratory's battery cost model. The model developed by ANL allows
users to estimate unique battery pack cost using user customized input
sets for different hybridization applications, such as strong hybrid,
PHEV and EV. Based on staff input and public feedback EPA and NHTSA
have modified how the indirect costs, using ICMs, were derived and
applied. The updates are discussed at length in Chapter 3 of the Joint
TSD and in Chapter 5 of NHTSA's PRIA.
Some of the effectiveness estimates for technologies applied in MYs
2012-2016 and 2010 TAR have remained the same. However, nearly all of
the effectiveness estimates for carryover technologies have been
updated based on a newer version of EPA's lumped parameter model, which
was calibrated by the vehicle simulation work performed by Ricardo
Engineering. The Ricardo simulation study was also used to estimate the
effectiveness for the technologies newly considered for this proposal
like higher BMEP turbocharged and downsized engine, advanced
transmission technologies and P2 Hybrids. While NHTSA and EPA apply
technologies differently, the agencies have sought to ensure that the
resultant effectiveness of applying technologies is consistent between
the two agencies.
NHTSA notes that, in developing technology cost and effectiveness
estimates, the agencies have made every effort to hold constant aspects
of vehicle performance and utility typically valued by consumers, such
as horsepower, carrying capacity, drivability, durability, noise,
vibration and harshness (NVH) and towing and hauling capacity. For
example, NHTSA includes in its analysis technology cost and
effectiveness estimates that are specific to performance passenger cars
(i.e., sports cars), as compared to nonperformance passenger cars.
NHTSA seeks comment on the extent to which commenters believe that the
agencies have been successful in holding constant these elements of
vehicle performance and utility in developing the technology cost and
effectiveness estimates.
The agency notes that the technology costs included in this
proposal take into account only those associated with the initial build
of the vehicle. Although comments were received to the MYs
[[Page 75180]]
2012-2016 rulemaking that suggested there could be additional
maintenance required with some new technologies (e.g., turbocharging,
hybrids, etc.), and that additional maintenance costs could occur as a
result, the agencies have not explicitly incorporated maintenance costs
(or potential savings) as a separate element in this analysis. The
agency requests comments on this topic and will undertake a more
detailed review of these potential costs for the final rule.
For some of the technologies, NHTSA's inputs, which are designed to
be as consistent as practicable with EPA's, indicate negative
incremental costs. In other words, the agency is estimating that some
technologies, if applied in a manner that holds performance and utility
constant, will, following initial investment (for, e.g., R&D and
tooling) by the manufacturer and its suppliers, incrementally improve
fuel savings and reduce vehicle costs. Nonetheless, in the agency's
central analysis, these and other technologies are applied only insofar
as is necessary to achieve compliance with standards defining any given
regulatory alternative (where the baseline no action alternative
assumes CAFE standards are held constant after MY 2016). The agency has
also performed a sensitivity analysis involving market-based
application of technology--that is, the application of technology
beyond the point needed to achieve compliance, if the cost of the
technology is estimated to be sufficiently attractive relative to the
accompanying fuel savings. NHTSA has invited comment on all of its
technology estimates, and specifically requests comment on the
likelihood that each technology will, if applied in a manner that holds
vehicle performance and utility constant, be able to both deliver the
estimated fuel savings and reduce vehicle cost. The agency also invites
comment on whether, for the final rule, its central analysis should be
revised to include estimated market-driven application of technology.
The tables below provide examples of the incremental cost and
effectiveness estimates employed by the agency in developing this
proposal, according to the decision trees used in the CAFE modeling
analysis. Thus, the effectiveness and cost estimates are not absolute
to a single reference vehicle, but are incremental to the technology or
technologies that precede it.
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c. How does NHTSA use these assumptions in its modeling analysis?
NHTSA relies on several inputs and data files to conduct the
compliance analysis using the CAFE model, as discussed further below
and in Chapter 5 of the PRIA. For the purposes of applying
technologies, the CAFE model primarily uses three data files, one that
contains data on the vehicles expected to be manufactured in the model
years covered by the rulemaking and identifies the appropriate stage
within the vehicle's life-cycle for the technology to be applied, one
that contains data/parameters regarding the available technologies the
model can apply, and one that contains economic assumption inputs for
calculating the costs and benefits of the standards. The inputs for the
first two data files are discussed below.
As discussed above, the CAFE model begins with an initial state of
the domestic vehicle market, which in this case is the market for
passenger cars and light trucks to be sold during the period covered by
the proposed standards. The vehicle market is defined on a year-by-
year, model-by-model, engine-by-engine, and transmission-by-
transmission basis, such that each defined vehicle model refers to a
separately defined engine and a separately defined transmission.
Comparatively, EPA's OMEGA model defines the vehicle market using
representative vehicles at the vehicle platform level, which are binned
into 5 year timeframes instead of year-by-year.
For the current standards, which cover MYs 2017-2025, the light-
duty vehicle (passenger car and light truck) market forecast was
developed jointly by NHTSA and EPA staff using MY 2008 CAFE compliance
data. The MY 2008 compliance data includes about 1,100 vehicle models,
about 400 specific engines, and about 200 specific transmissions, which
is a somewhat lower level of detail in the representation of the
vehicle market than that used by NHTSA in prior CAFE analyses--previous
analyses would count a vehicle as ``new'' in any year when significant
technology differences are made, such as at a redesign.\624\ However,
within the limitations of information that can be made available to the
public, it provides the foundation for a reasonable analysis of
manufacturer-specific costs and the analysis of attribute-based CAFE
standards, and is much greater than the level of detail used by many
other models and analyses relevant to light-duty vehicle fuel
economy.\625\
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\624\ The market file for the MY 2011 final rule, which included
data for MYs 2011-2015, had 5500 vehicles, about 5 times what we are
using in this analysis of the MY 2008 certification data.
\625\ Because CAFE standards apply to the average performance of
each manufacturer's fleet of cars and light trucks, the impact of
potential standards on individual manufacturers cannot be credibly
estimated without analysis of the fleets that manufacturers can be
expected to produce in the future. Furthermore, because required
CAFE levels under an attribute-based CAFE standard depend on
manufacturers' fleet composition, the stringency of an attribute-
based standard cannot be predicted without performing analysis at
this level of detail.
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In addition to containing data about each vehicle, engine, and
transmission, this file contains information for each technology under
consideration as it pertains to the specific vehicle (whether the
vehicle is equipped with it or not), the estimated model year the
vehicle is undergoing a refresh or redesign, and information about the
vehicle's subclass for purposes of technology application. In essence,
the model considers whether it is appropriate to apply a technology to
a vehicle.
Is a vehicle already equipped, or can it not be equipped, with a
particular technology?
The market forecast file provides NHTSA the ability to identify, on
a technology-by-technology basis, which technologies may already be
present (manufactured) on a particular vehicle, engine, or
transmission, or which technologies are not applicable (due to
technical considerations or engineering constraints) to a particular
vehicle, engine, or transmission. These identifications are made on a
model-by-model, engine-by-engine, and transmission-by-transmission
basis. For example, if the market forecast file indicates that
Manufacturer X's Vehicle Y is manufactured with Technology Z, then for
this vehicle Technology Z will be shown as used. Additionally, NHTSA
has determined that some technologies are only suitable or unsuitable
when certain vehicle, engine, or transmission conditions exist. For
example, secondary axle disconnect is only suitable for 4WD vehicles
and cylinder deactivation is unsuitable for any engine with fewer than
6 cylinders. Similarly, comments received to the 2008 NPRM indicated
that cylinder deactivation could not likely be applied to vehicles
equipped with manual transmissions during the rulemaking timeframe, due
primarily to the cylinder deactivation system not being able to
anticipate gear shifts. The CAFE model employs ``engineering
constraints'' to address issues like these, which are a programmatic
method of controlling technology application that is independent of
other constraints. Thus, the market forecast file would indicate that
the technology in question should not be applied to the particular
vehicle/engine/transmission (i.e., is unavailable). Since multiple
vehicle models may be equipped with an engine or transmission, this may
affect multiple models. In using this aspect of the market forecast
file, NHTSA ensures the CAFE model only applies technologies in an
appropriate manner, since before any application of a technology can
occur, the model checks the market forecast to see if it is either
already present or unavailable. NHTSA seeks comment on the continued
appropriateness of the engineering constraints used by the model, and
specifically whether many of the technical constraints will be resolved
(and therefore the engineering constraints should be changed) given the
increased focus of engineering resources that will be working to solve
these technical challenges.
Whether a vehicle can be equipped with a particular technology
could also theoretically depend on certain technical considerations
related to incorporating the technology into particular vehicles. For
example, GM commented on the MY 2012-2016 NPRM that there are certain
issues in implementing turbocharging and downsizing technologies on
full-size trucks, like concerns related to engine knock, drivability,
control of boost pressure, packaging complexity, enhanced cooling for
vehicles that are designed for towing or hauling, and noise, vibration
and harshness. NHTSA stated in response that we believed that such
technical considerations are well recognized within the industry and it
is standard industry practice to address each during the design and
development phases of applying turbocharging and downsizing
technologies. The cost and effectiveness estimates used in the final
rule for MYs 2012-2016, as well as the cost and effectiveness estimates
employed in this NPRM, are based on analysis that assumes each of these
factors is addressed prior to production implementation of the
technologies. NHTSA continues to believe that these issues are
accounted for by industry, but we seek comment on whether the
engineering constraints should be used to address concerns like these
(and if so, how), or alternatively, whether some of the things that the
agency currently treats as engineering constraints should be (or
actually are) accounted for in the cost and effectiveness estimates
through assumptions like those described above, and whether the agency
might be double-constraining the application of technology.
Is a vehicle being redesigned or refreshed?
Manufacturers typically plan vehicle changes to coincide with
certain stages
[[Page 75191]]
of a vehicle's life cycle that are appropriate for the change, or in
this case the technology being applied. In the automobile industry
there are two terms that describe when technology changes to vehicles
occur: Redesign and refresh (i.e., freshening). Vehicle redesign
usually refers to significant changes to a vehicle's appearance, shape,
dimensions, and powertrain. Redesign is traditionally associated with
the introduction of ``new'' vehicles into the market, often
characterized as the ``next generation'' of a vehicle, or a new
platform. Vehicle refresh usually refers to less extensive vehicle
modifications, such as minor changes to a vehicle's appearance, a
moderate upgrade to a powertrain system, or small changes to the
vehicle's feature or safety equipment content. Refresh is traditionally
associated with mid-cycle cosmetic changes to a vehicle, within its
current generation, to make it appear ``fresh.'' Vehicle refresh
generally occurs no earlier than two years after a vehicle redesign, or
at least two years before a scheduled redesign. To be clear, this is a
general description of how manufacturers manage their product lines and
refresh and redesign cycles but in some cases the timeframes could be
shorter and others longer depending on market factors, regulations,
etc. For the majority of technologies discussed today, manufacturers
will only be able to apply them at a refresh or redesign, because their
application would be significant enough to involve some level of
engineering, testing, and calibration work.\626\
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\626\ For example, applying material substitution through weight
reduction, or even something as simple as low rolling-resistance
tires, to a vehicle will likely require some level of validation and
testing to ensure that the vehicle may continue to be certified as
compliant with NHTSA's Federal Motor Vehicle Safety Standards
(FMVSS). Weight reduction might affect a vehicle's crashworthiness;
low rolling-resistance tires might change a vehicle's braking
characteristics or how it performs in crash avoidance tests.
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Some technologies (e.g., those that require significant revision)
are nearly always applied only when the vehicle is expected to be
redesigned, like turbocharging and engine downsizing, or conversion to
diesel or hybridization. Other technologies, like cylinder
deactivation, electric power steering, and low rolling resistance tires
can be applied either when the vehicle is expected to be refreshed or
when it is expected to be redesigned, while low friction lubricants,
can be applied at any time, regardless of whether a refresh or redesign
event is conducted. Accordingly, the model will only apply a technology
at the particular point deemed suitable. These constraints are intended
to produce results consistent with how we assume manufacturers will
apply technologies in the future based on how they have historically
implemented new technologies. For each technology under consideration,
NHTSA specifies whether it can be applied any time, at refresh/
redesign, or only at redesign. The data forms another input to the CAFE
model. NHTSA develops redesign and refresh schedules for each of a
manufacturer's vehicles included in the analysis, essentially based on
the last known redesign year for each vehicle and projected forward
using a 5 to 8-year redesign and a 2-3 year refresh cycle, and this
data is also stored in the market forecast file. While most vehicles
are projected to follow a 5-year redesign a few of the niche market or
small-volume manufacturer vehicles (i.e. luxury and performance
vehicles) and large trucks are assumed to have 6- to 8-year redesigns
based on historic redesign schedules and the agency's understanding of
manufacturers' intentions moving forward. This approach is used because
of the nature of the current baseline, which as a single year of data
does not contain its own refresh and redesign cycle cues for future
model years, and to ensure the complete transparency of the agency's
analysis. We note that this approach is different from what NHTSA has
employed previously for determining redesign and refresh schedules,
where NHTSA included the redesign and refresh dates in the market
forecast file as provided by manufacturers in confidential product
plans. Vehicle redesign/refresh assumptions are discussed in more
detail in Chapter 5 of the PRIA and in Chapter 3 of the TSD.
NHTSA has previously received comments stating that manufacturers
do not necessarily adhere to strict five-year redesign cycles, and may
add significant technologies by redesigning vehicles at more frequent
intervals, albeit at higher costs. Conversely, other comments received
stated that as compared to full-line manufacturers, small-volume
manufacturers in fact may have 7 to 8-year redesign cycles.\627\ The
agency believes that manufacturers can and will accomplish much
improvement in fuel economy and GHG reductions while applying
technology consistent with their redesign schedules.
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\627\ In the MY 2011 final rule, NHTSA noted that the CAR report
submitted by the Alliance, prepared by the Center for Automotive
Research and EDF, stated that ``For a given vehicle line, the time
from conception to first production may span two and one-half to
five years,'' but that ``The time from first production
(``Job1'') to the last vehicle off the line (``Balance
Out'') may span from four to five years to eight to ten years or
more, depending on the dynamics of the market segment.'' The CAR
report then stated that ``At the point of final production of the
current vehicle line, a new model with the same badge and similar
characteristics may be ready to take its place, continuing the
cycle, or the old model may be dropped in favor of a different
product.'' See NHTSA-2008-0089-0170.1, Attachment 16, at 8 (393 of
pdf). NHTSA explained that this description, which states that a
vehicle model will be redesigned or dropped after 4-10 years, was
consistent with other characterizations of the redesign and
freshening process, and supported the 5-year redesign and 2-3 year
refresh cycle assumptions used in the MY 2011 final rule. See id.,
at 9 (394 of pdf). Given that the situation faced by the auto
industry today is not so wholly different from that in March 2009,
when the MY 2011 final rule was published, and given that the
commenters did not present information to suggest that these
assumptions are unreasonable (but rather simply that different
manufacturers may redesign their vehicles more or less frequently,
as the range of cycles above indicates), NHTSA believes that the
assumptions remain reasonable for purposes of this NPRM analysis.
See also ``Car Wars 2009-2012, The U.S. automotive product
pipeline,'' John Murphy, Research Analyst, Merrill Lynch research
paper, May 14, 2008 and ``Car Wars 2010-2013, The U.S. automotive
product pipeline,'' John Murphy, Research Analyst, Bank of America/
Merrill Lynch research paper, July 15, 2009. Available at http://www.autonews.com/assets/PDF/CA66116716.PDF (last accessed October
11, 2011).
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Once the model indicates that a technology should be applied to a
vehicle, the model must evaluate which technology should be applied.
This will depend on the vehicle subclass to which the vehicle is
assigned; what technologies have already been applied to the vehicle
(i.e., where in the ``decision tree'' the vehicle is); when the
technology is first available (i.e., year of availability); whether the
technology is still available (i.e., ``phase-in caps''); and the costs
and effectiveness of the technologies being considered. Technology
costs may be reduced, in turn, by learning effects and short- vs. long-
term ICMs, while technology effectiveness may be increased or reduced
by synergistic effects between technologies. In the technology input
file, NHTSA has developed a separate set of technology data variables
for each of the twelve vehicle subclasses. Each set of variables is
referred to as an ``input sheet,'' so for example, the subcompact
passenger car input sheet holds the technology data that is appropriate
for the subcompact subclass. Each input sheet contains a list of
technologies available for members of the particular vehicle subclass.
The following items are provided for each technology: The name of the
technology, its abbreviation, the decision tree with which it is
associated, the (first) year in which it is available, the year-by-year
cost estimates and effectiveness (fuel consumption reduction)
estimates, its applicability and the consumer value
[[Page 75192]]
loss. The phase-in values and the potential stranded capital costs are
common for all vehicle subclasses and are thus listed in a separate
input sheet that is referenced for all vehicle subclasses.
To which vehicle subclass is the vehicle assigned?
As part of its consideration of technological feasibility, the
agency evaluates whether each technology could be implemented on all
types and sizes of vehicles, and whether some differentiation is
necessary in applying certain technologies to certain types and sizes
of vehicles, and with respect to the cost incurred and fuel consumption
and CO2 emissions reduction achieved when doing so. The 2010
NAS Report differentiated technology application using eight vehicle
``classes'' (4 car classes and 4 truck classes).\628\ NAS's purpose in
separating vehicles into these classes was to create groups of ``like''
vehicles, i.e., vehicles similar in size, powertrain configuration,
weight, and consumer use, and for which similar technologies are
applicable. NAS also used these vehicle classes along with powertrain
configurations (e.g..4 cylinder, 6 cylinder or 8 cylinder engines) to
determine unique cost and effectiveness estimates for each class of
vehicles.
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\628\ The NAS classes included two-seater convertibles and
coupes; small cars; intermediate and large cars; high-performance
sedans; unit-body standard trucks; unit-body high-performance
trucks; body-on-frame small and midsize trucks; and body.
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NHTSA similarly differentiates vehicles by ``subclass'' for the
purpose of applying technologies to ``like'' vehicles and assessing
their incremental costs and effectiveness. NHTSA assigns each vehicle
manufactured in the rulemaking period to one of 12 subclasses: For
passenger cars, Subcompact, Subcompact Performance, Compact, Compact
Performance, Midsize, Midsize Performance, Large, and Large
Performance; and for light trucks, Small SUV/Pickup/Van, Midsize SUV/
Pickup/Van, Large SUV/Pickup/Van, and Minivan. The agency seeks comment
on the appropriateness of these 12 subclasses for the MYs 2017-2025
timeframe. The agency is also seeking comment on the continued
appropriateness of maintaining separate ``performance'' vehicle classes
or if as fuel economy stringency increases the market for performance
vehicles will decrease.
For this NPRM, NHTSA divides the vehicle fleet into subclasses
based on model inputs, and applies subclass-specific estimates, also
from model inputs, of the applicability, cost, and effectiveness of
each fuel-saving technology. The model's estimates of the cost to
improve the fuel economy of each vehicle model thus depend upon the
subclass to which the vehicle model is assigned. Each vehicle's
subclass is stored in the market forecast file. When conducting a
compliance analysis, if the CAFE model seeks to apply technology to a
particular vehicle, it checks the market forecast to see if the
technology is available and if the refresh/redesign criteria are met.
If these conditions are satisfied, the model determines the vehicle's
subclass from the market data file, which it then uses to reference
another input called the technology input file. NHTSA reviewed its
methodology for dividing vehicles into subclasses for purposes of
technology application that it used in the MY 2011 final rule and for
the MYs 2012-2016 rulemaking, and concluded that the same methodology
would be appropriate for this NPRM for MYs 2017-2025. Vehicle
subclasses are discussed in more detail in Chapter 5 of the PRIA and in
Chapter 3 of the TSD.
For the reader's reference, the subclasses and example vehicles
from the market forecast file are provided in the tables below.
[[Page 75193]]
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What technologies have already been applied to the vehicle (i.e., where
in the ``decision trees'' is it)?
NHTSA's methodology for technology analysis evaluates the
application of individual technologies and their incremental costs and
effectiveness. Individual technologies are assessed relative to the
prior technology state, which means that it is crucial to understand
what technologies are already present on a vehicle in order to
determine correct incremental cost and effectiveness values. The
benefit of the incremental approach is transparency in accounting,
insofar as when individual technologies are added incrementally to
individual vehicles, it is clear and easy to determine how costs and
effectiveness add up as technology levels increase and explicitly
accounting for any synergies that exist between technologies which are
already present on the vehicle and new technologies being applied.
To keep track of incremental costs and effectiveness and to know
which technology to apply and in which order, the CAFE model's
architecture uses a logical sequence, which NHTSA refers to as
``decision trees,'' for applying fuel economy-improving technologies to
individual vehicles. For purposes of this proposal, NHTSA reviewed the
MYs 2012-2016 final rule's technology sequencing architecture, which
was based on the MY 2011 final rule's decision trees that were jointly
developed by NHTSA and Ricardo, and, as appropriate, updated the
decision trees to include new technologies that have been defined for
the MYs 2017-2025 timeframe.
In general, and as described in great detail in Chapter 5 of the
current PRIA,\629\ each technology is assigned to one of the five
following categories based on the system it affects or impacts: Engine,
transmission, electrification/accessory, hybrid or
[[Page 75194]]
vehicle. Each of these categories has its own decision tree that the
CAFE model uses to apply technologies sequentially during the
compliance analysis. The decision trees were designed and configured to
allow the CAFE model to apply technologies in a cost-effective, logical
order that also considers ease of implementation. For example, software
or control logic changes are implemented before replacing a component
or system with a completely redesigned one, which is typically a much
more expensive and integration intensive option. In some cases, and as
appropriate, the model may combine the sequential technologies shown on
a decision tree and apply them simultaneously, effectively developing
dynamic technology packages on an as-needed basis. For example, if
compliance demands indicate, the model may elect to apply LUB, EFR, and
ICP on a dual overhead cam engine, if they are not already present, in
one single step. An example simplified decision tree for engine
technologies is provided below; the other simplified decision trees may
be found in Chapter 5 of the PRIA. Expanded decision trees are
available in the docket for this NPRM.
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\629\ Additional details about technologies are categorized can
be found in the MY 2011 final rule.
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[[Page 75195]]
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Each technology within the decision trees has an incremental cost
and an incremental effectiveness estimate associated with it, and
estimates are specific to a particular vehicle subclass (see the tables
in Chapter 5 of the PRIA).
[[Page 75196]]
Each technology's incremental estimate takes into account its position
in the decision tree path. If a technology is located further down the
decision tree, the estimates for the costs and effectiveness values
attributed to that technology are influenced by the incremental
estimates of costs and effectiveness values for prior technology
applications. In essence, this approach accounts for ``in-path''
effectiveness synergies, as well as cost effects that occur between the
technologies in the same path. When comparing cost and effectiveness
estimates from various sources and those provided by commenters in this
and the previous CAFE rulemakings, it is important that the estimates
evaluated are analyzed in the proper context, especially as concerns
their likely position in the decision trees and other technologies that
may be present or missing. Not all estimates available in the public
domain or that have been (or will be) offered for the agencies'
consideration can be evaluated in an ``apples-to-apples'' comparison
with those used by the CAFE model, since in some cases the order of
application, or included technology content, is inconsistent with that
assumed in the decision tree.
The MY 2011 final rule discussed in detail the revisions and
improvements made to the CAFE model and decision trees during that
rulemaking process, including the improved handling and accuracy of
valve train technology application and the development and
implementation of a method for accounting path-dependent correction
factors in order to ensure that technologies are evaluated within the
proper context. The reader should consult the MY 2011 final rule
documents for further information on these modeling techniques, all of
which continued to be utilized in developing this proposal.\630\ To the
extent that the decision trees have changed for purposes of the MYs
2012-2016 final rule and this NPRM, it was due not to revisions in the
order of technology application, but rather to redefinitions of
technologies or addition or subtraction of technologies.
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\630\ See, e.g., 74 FR 14238-46 (Mar. 30, 2009) for a full
discussion of the decision trees in NHTSA's MY 2011 final rule, and
Docket No. NHTSA-2009-0062-0003.1 for an expanded decision tree used
in that rulemaking.
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Is the next technology available in this model year?
Some of technologies considered are available on vehicles today,
and thus will be available for application (albeit in varying degrees)
in the model starting in MY 2017. Other technologies, however, will not
become available for purposes of NHTSA's analysis until later in the
rulemaking time frame. When the model is considering whether to add a
technology to a vehicle, it checks its year of availability--if the
technology is available, it may be added; if it is not available, the
model will consider whether to switch to a different decision tree to
look for another technology, or will skip to the next vehicle in a
manufacturer's fleet. The year of availability for each technology is
provided above in Table IV-4.
The agency has received comments previously stating that if a
technology is currently available or available prior to the rulemaking
timeframe that it should be immediately made available in the model. In
response, as discussed above, technology ``availability'' is not
determined based simply on whether the technology exists, but depends
also on whether the technology has achieved a level of technical
viability that makes it appropriate for widespread application. This
depends in turn on component supplier constraints, capital investment
and engineering constraints, and manufacturer product cycles, among
other things. Moreover, even if a technology is available for
application, it may not be available for every vehicle. Some
technologies may have considerable fuel economy benefits, but cannot be
applied to some vehicles due to technological constraints--for example,
cylinder deactivation cannot be applied to vehicles with current 4-
cylinder engines (because not enough cylinders are present to
deactivate some and continue moving the vehicle) or on vehicles with
manual transmissions within the rulemaking timeframe. The agencies have
provided for increases over time to reach the mpg level of the MY 2025
standards precisely because of these types of constraints, because they
have a real effect on how quickly manufacturers can apply technology to
vehicles in their fleets. NHTSA seeks comment on the appropriateness of
the assumed years of availability.
Has the technology reached the phase-in cap for this model year?
Besides the refresh/redesign cycles used in the CAFE model, which
constrain the rate of technology application at the vehicle level so as
to ensure a period of stability following any modeled technology
applications, the other constraint on technology application employed
in NHTSA's analysis is ``phase-in caps.'' Unlike vehicle-level cycle
settings, phase-in caps constrain technology application at the vehicle
manufacturer level.\631\ They are intended to reflect a manufacturer's
overall resource capacity available for implementing new technologies
(such as engineering and development personnel and financial
resources), thereby ensuring that resource capacity is accounted for in
the modeling process. At a high level, phase-in caps and refresh/
redesign cycles work in conjunction with one another to avoid the
modeling process out-pacing an OEM's limited pool of available
resources during the rulemaking time frame and the years leading up to
the rulemaking time frame, especially in years where many models may be
scheduled for refresh or redesign. Even though this rulemaking is being
proposed 5 years before it takes effect, OEM's will still be utilizing
their limited resources to meet the MYs 2012-2016 CAFE standards. This
helps to ensure technological feasibility and economic practicability
in determining the stringency of the standards.
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\631\ While phase-in caps are expressed as specific percentages
of a manufacturer's fleet to which a technology may be applied in a
given model year, phase-in caps cannot always be applied as precise
limits, and the CAFE model in fact allows ``override'' of a cap in
certain circumstances. When only a small portion of a phase-in cap
limit remains, or when the cap is set to a very low value, or when a
manufacturer has a very limited product line, the cap might prevent
the technology from being applied at all since any application would
cause the cap to be exceeded. Therefore, the CAFE model evaluates
and enforces each phase-in cap constraint after it has been exceeded
by the application of the technology (as opposed to evaluating it
before application), which can result in the described overriding of
the cap.
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NHTSA has been developing the concept of phase-in caps for purposes
of the agency's modeling analysis over the course of the last several
CAFE rulemakings, as discussed in greater detail in the MY 2011 final
rule,\632\ in the MY 2012-2016 final rule and in Chapter 5 of the PRIA
and Chapter 3 of the Joint TSD. The MYs 2012-2016 final rule like the
MY 2011 final rule employed non-linear phase-in caps (that is, caps
that varied from year to year) that were designed to respond to
previously received comments on technology deployment.
---------------------------------------------------------------------------
\632\ NEED A FOOTNOTE HERE
---------------------------------------------------------------------------
For purposes of this NPRM for MYs 2017-2025, as in the MY 2011 and
MYs 2012-2016 final rules, NHTSA combines phase-in caps for some groups
of similar technologies, such as valve phasing technologies that are
applicable to different forms of engine design (SOHC, DOHC, OHV), since
they are very similar from an engineering and implementation
standpoint. When the phase-in caps for two technologies are combined,
the maximum total
[[Page 75197]]
application of either or both to any manufacturer's fleet is limited to
the value of the cap.\633\
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\633\ See 74 FR at 14270 (Mar. 30, 2009) for further discussion
and examples.
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In developing phase-in cap values for purposes of this NPRM, NHTSA
reviewed the MYs 2012-2016 final rule's phase-in caps, which for the
majority of technologies were set to reach 85 or 100 percent by MY
2016, although more advanced technologies like diesels and strong
hybrids reach only 15 percent by MY 2016. The phase-in caps used in the
MYs 2012-2016 final were developed to harmonize with EPA's proposal and
consider the fact that manufacturers, as part of the information shared
during the discussions that occurred during summer 2011, appeared to be
anticipating higher technology application rates than assumed in prior
rules. NHTSA determined that these phase-in caps for MY 2016 were still
reasonable and thus used those caps as the starting point for the MYs
2017-2025 phase-in caps. For many of the carryover technologies this
means that for MYs 2017-2025 the phase-in caps are assumed to be 100
percent. NHTSA along with EPA used confidential OEM submissions, trade
press articles, company publications and press releases to estimate the
phase-in caps for the newly defined technologies that will be entering
the market just before or during the MYs 2017-2025 time frame. For
example, advanced cooled EGR engines have a phase-in cap of 3 percent
per year through MY 2021 and then 10 percent per year through 2025. The
agency seeks comment on the appropriateness of both the carryover
phase-in caps and the newly defined ones proposed in this NPRM.
Is the technology less expensive due to learning effects?
In the past two rulemakings NHTSA has explicitly accounted for the
cost reductions a manufacturer might realize through learning achieved
from experience in actually applying a technology. These cost
reductions, due to learning effects, were taken into account through
two kinds of mutually exclusive learning, ``volume-based'' and ``time-
based.'' NHTSA and EPA included a detailed description of the learning
effect in the MYs 2012-2016 final rule and the more recent heavy-duty
rule.\634\
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\634\ 76 FR 57106, 57320 (Sept. 15, 2011).
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Most studies of the effect of experience or learning on production
costs appear to assume that cost reductions begin only after some
initial volume threshold has been reached, but not all of these studies
specify this threshold volume. The rate at which costs decline beyond
the initial threshold is usually expressed as the percent reduction in
average unit cost that results from each successive doubling of
cumulative production volume, sometimes referred to as the learning
rate. Many estimates of experience curves do not specify a cumulative
production volume beyond which cost reductions would no longer occur,
instead depending on the asymptotic behavior of the effect for learning
rates below 100 percent to establish a floor on costs.
In past rulemaking analyses, as noted above, both agencies have
used a learning curve algorithm that applied a learning factor of 20
percent for each doubling of production volume. NHTSA has used this
approach in analyses supporting recent CAFE rules. In its analyses, EPA
has simplified the approach by using an ``every two years'' based
learning progression rather than a pure production volume progression
(i.e., after two years of production it was assumed that production
volumes would have doubled and, therefore, costs would be reduced by 20
percent).\635\
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\635\ To clarify, EPA has simplified the steep portion of the
volume learning curve by assuming that production volumes of a given
technology will have doubled within two years time. This has been
done largely to allow for a presentation of estimated costs during
the years of implementation, without the need to conduct a feedback
loop that ensures that production volumes have indeed doubled. If
EPA was to attempt such a feedback loop, it would need to estimate
first year costs, feed those into OMEGA, review the resultant
technology penetration rate and volume increase, calculate the
learned costs, feed those into OMEGA (since lower costs would result
in higher penetration rates, review the resultant technology
penetration rate and volume increase, etc., until an equilibrium was
reached. To do this for the dozens of technologies considered in the
analysis for this rulemaking was deemed not feasible. Instead, EPA
estimated the effects of learning on costs, fed those costs into
OMEGA, and reviewed the resultant penetration rates. The assumption
that volumes have doubled after two years is based solely on the
assumption that year two sales are of equal or greater number than
year one sales and, therefore, have resulted in a doubling of
production. This could be done on a daily basis, a monthly basis, or
a yearly basis as was done for this analysis.
---------------------------------------------------------------------------
In the MYs 2012-2016 light-duty rule, the agencies employed an
additional learning algorithm to reflect the volume-based learning cost
reductions that occur further along on the learning curve. This
additional learning algorithm was termed ``time-based'' learning simply
as a means of distinguishing this algorithm from the volume-based
algorithm mentioned above, although both of the algorithms reflect the
volume-based learning curve supported in the literature. To avoid
confusion, we are now referring to this learning algorithm as the
``flat portion'' of the learning curve. This way, we maintain the
clarity that all learning is, in fact, volume-based learning, and that
the level of cost reductions depend only on where on the learning curve
a technology's learning progression is. We distinguish the flat portion
of the curve from the ``steep portion'' of the curve to indicate the
level of learning taking place in the years following implementation of
the technology. The agencies have applied the steep portion learning
algorithm for those technologies considered to be newer technologies
likely to experience rapid cost reductions through manufacturer
learning, and the flat portion learning algorithm for those
technologies considered to be mature technologies likely to experience
only minor cost reductions through manufacturer learning. As noted
above, the steep portion learning algorithm results in 20 percent lower
costs after two full years of implementation (i.e., the MY 2016 costs
are 20 percent lower than the MYs 2014 and 2015 costs). Once two steep
portion learning steps have occurred (for technologies having the steep
portion learning algorithm applied while flat portion learning would
begin in year 2 for technologies having the flat portion learning
algorithm applied), flat portion learning at 3 percent per year becomes
effective for 5 years. Beyond 5 years of learning at 3 percent per
year, 5 years of learning at 2 percent per year, then 5 at 1 percent
per year become effective.
Technologies assumed to be on the steep portion of the learning
curve are hybrids and electric vehicles, while no learning is applied
to technologies likely to be affected by commodity costs (LUB, ROLL) or
that have loosely-defined BOMs (EFR, LDB), as was the case in the MY
2012-2016 final rule. Chapter 3 of the Joint TSD and the PRIA shows the
specific learning factors that NHTSA has applied in this analysis for
each technology, and discusses learning factors and each agency's use
of them further. EPA and NHTSA included discussion of learning cost
assumptions in the RIAs and TSD Chapter 3. Since the agencies had to
project how learning will occur with new technologies over a long
period of time, we request comments on the assumptions of learning
costs and methodology. In particular, we are interested in input on the
assumptions for advanced 27-bar BMEP cooled EGR engines, which are
currently still in the experimental stage and not expected to be
available in
[[Page 75198]]
volume production until 2017. For our analysis, we have based estimates
of the costs of high-BMEP engines on current (or soon to be current)
production engines, and assumed that learning (and the associated cost
reductions) begins as early as 2012. We seek comment on the
appropriateness of these pre-production applications of learning.
Is the technology more or less effective due to synergistic effects?
When two or more technologies are added to a particular vehicle
model to improve its fuel efficiency and reduce CO2
emissions, the resultant fuel consumption reduction may sometimes be
higher or lower than the product of the individual effectiveness values
for those items.\636\ This may occur because one or more technologies
applied to the same vehicle partially address the same source (or
sources) of engine, drivetrain or vehicle losses. Alternately, this
effect may be seen when one technology shifts the engine operating
points, and therefore increases or reduces the fuel consumption
reduction achieved by another technology or set of technologies. The
difference between the observed fuel consumption reduction associated
with a set of technologies and the product of the individual
effectiveness values in that set is referred to for purposes of this
rulemaking as a ``synergy.'' Synergies may be positive (increased fuel
consumption reduction compared to the product of the individual
effects) or negative (decreased fuel consumption reduction). An example
of a positive synergy might be a vehicle technology that reduces road
loads at highway speeds (e.g., lower aerodynamic drag or low rolling
resistance tires), that could extend the vehicle operating range over
which cylinder deactivation may be employed. An example of a negative
synergy might be a variable valvetrain system technology, which reduces
pumping losses by altering the profile of the engine speed/load map,
and a six-speed automatic transmission, which shifts the engine
operating points to a portion of the engine speed/load map where
pumping losses are less significant.
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\636\ More specifically, the products of the differences between
one and the technology-specific levels of effectiveness in reducing
fuel consumption. For example, not accounting for interactions, if
technologies A and B are estimated to reduce fuel consumption by 10
percent (i.e., 0.1) and 20 percent (i.e., 0.2) respectively, the
``product of the individual effectiveness values'' would be 1-0.1
times 1-0.2, or 0.9 times 0.8, which equals 0.72, corresponding to a
combined effectiveness of 28 percent rather than the 30 percent
obtained by adding 10 percent to 20 percent. The ``synergy factors''
discussed in this section further adjust these multiplicatively
combined effectiveness values.
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As the complexity of the technology combinations is increased, and
the number of interacting technologies grows accordingly, it becomes
increasingly important to account for these synergies. NHTSA and EPA
determined synergistic impacts for this proposed rule using EPA's
``lumped parameter'' analysis tool, which EPA describes at length in
Chapter 3 of the TSD. The lumped parameter tool is a spreadsheet model
that represents energy consumption in terms of average performance over
the fuel economy test procedure, rather than explicitly analyzing
specific drive cycles. The tool begins with an apportionment of fuel
consumption across several loss mechanisms and accounts for the average
extent to which different technologies affect these loss mechanisms
using estimates of engine, drivetrain and vehicle characteristics that
are averaged over the 2-cycle CAFE drive cycle. Results of this
analysis were generally consistent with those of full-scale vehicle
simulation modeling performed in 2010-2011 for EPA by Ricardo, Inc.
For the current rulemaking, NHTSA is using an updated version of
lumped parameter tool that incorporates results from simulation
modeling performed in 2010-2011 by Ricardo, Inc. NHTSA and EPA
incorporate synergistic impacts in their analyses in slightly different
manners. Because NHTSA applies technologies individually in its
modeling analysis, NHTSA incorporates synergistic effects between
pairings of individual technologies. The use of discrete technology
pair incremental synergies is similar to that in DOE's National Energy
Modeling System (NEMS).\637\ Inputs to the CAFE model incorporate NEMS-
identified pairs, as well as additional pairs from the set of
technologies considered in the CAFE model.
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\637\ U.S. Department of Energy, Energy Information
Administration, Transportation Sector Module of the National Energy
Modeling System: Model Documentation 2007, May 2007, Washington, DC,
DOE/EIAM070(2007), at 29-30. Available at http://tonto.eia.doe.gov/ftproot/modeldoc/m070(2007).pdf (last accessed Sept. 25, 2011).
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NHTSA notes that synergies that occur within a decision tree are
already addressed within the incremental values assigned and therefore
do not require a synergy pair to address. For example, all engine
technologies take into account incremental synergy factors of preceding
engine technologies, and all transmission technologies take into
account incremental synergy factors of preceding transmission
technologies. These factors are expressed in the fuel consumption
improvement factors in the input files used by the CAFE model.
For applying incremental synergy factors in separate path
technologies, the CAFE model uses an input table (see the tables in
Chapter 3 of the TSD and in the PRIA) that lists technology pairings
and incremental synergy factors associated with those pairings, most of
which are between engine technologies and transmission/electrification/
hybrid technologies. When a technology is applied to a vehicle by the
CAFE model, all instances of that technology in the incremental synergy
table which match technologies already applied to the vehicle (either
pre-existing or previously applied by the CAFE model) are summed and
applied to the fuel consumption improvement factor of the technology
being applied. Many of the synergies for the strong hybrid technology
fuel consumption reductions are included in the incremental value for
the specific hybrid technology block since the model applies all
available electrification, engine and transmission technologies before
applying strong hybrid technologies.
The U.S. DOT Volpe Center has entered into a contract with Argonne
National Laboratory (ANL) to provide full vehicle simulation modeling
support for this MYs 2017-2025 rulemaking. While this modeling was not
completed in time for use in this NPRM, NHTSA intends to use this
modeling to validate/update technology effectiveness estimates and
synergy factors for the final rulemaking analysis. This simulation
modeling will be accomplished using ANL's full vehicle simulation tool
called ``Autonomie,'' which is the successor to ANL's Powertrain System
Analysis Toolkit (PSAT) simulation tool, and ANL's expertise with
advanced vehicle technologies.
d. Where can readers find more detailed information about NHTSA's
technology analysis?
Much more detailed information is provided in Chapter 5 of the
PRIA, and a discussion of how NHTSA and EPA jointly reviewed and
updated technology assumptions for purposes of this NPRM is available
in Chapter 3 of the TSD. Additionally, all of NHTSA's model input and
output files are now public and available for the reader's review and
consideration. The technology input files can be found in the docket
for this NPRM, Docket No. NHTSA-2010-0131, and on NHTSA's Web site. And
finally, because much of NHTSA's technology analysis for
[[Page 75199]]
purposes of this proposal builds on the work that was done for the MY
2011 and MYs 2012-2016 final rules, we refer readers to those documents
as well for background information concerning how NHTSA's methodology
for technology application analysis has evolved over the past several
rulemakings, both in response to comments and as a result of the
agency's growing experience with this type of analysis.\638\
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\638\ 74 FR 14233-308 (Mar. 30, 2009).
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3. How did NHTSA develop its economic assumptions?
NHTSA's analysis of alternative CAFE standards for the model years
covered by this rulemaking relies on a range of forecast variables,
economic assumptions, and parameter values. This section describes the
sources of these forecasts, the rationale underlying each assumption,
and the agency's choices of specific parameter values. These economic
values play a significant role in determining the benefits of
alternative CAFE standards, as they have for the last several CAFE
rulemakings. Under those alternatives where standards would be
established by reference to their costs and benefits, these economic
values also affect the levels of the CAFE standards themselves. Some of
these variables have more important effects on the level of CAFE
standards and the benefits from requiring alternative increases in fuel
economy than do others, and the following discussion places more
emphasis on these inputs.
In reviewing these variables and the agency's estimates of their
values for purposes of this proposed rule, NHTSA reconsidered comments
it had previously received on the NPRM for MYs 2012-16 CAFE standards
and to the NOI/Interim Joint TAR, and also reviewed newly available
literature. The agency elected to revise some of its economic
assumptions and parameter estimates for this rulemaking, while
retaining others. For the reader's reference, Table IV-7 below
summarizes the values used to calculate the economic benefits from each
alternative.
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[[Page 75201]]
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a. Costs of Fuel Economy-Improving Technologies
Building on cost estimates developed for the MYs 2012-2016 CAFE and
GHG final rule and the 2010 TAR, the agencies incorporated new cost
estimates for the new technologies being considered and some of the
technologies carried over from the MYs 2012-2016 final rule and 2010
TAR. This joint work is reflected in Chapter 3 of the Joint TSD and in
Section II of this preamble, as summarized below. For more detailed
information on cost of fuel-saving technologies, please refer to
Chapter 3 of the Joint TSD and Chapter V of NHTSA's PRIA.
The technology cost estimates used in this analysis are intended to
represent manufacturers' direct costs for high-volume production of
vehicles with these technologies. NHTSA explicitly accounts for the
cost reductions a manufacturer might realize through
[[Page 75202]]
learning achieved from experience in actually applying a technology,
which means that technologies become cheaper over the rulemaking time
frame; learning effects are described above and in Chapter 3 of the
draft joint TSD and Chapters V and VII of NHTSA's PRIA. NHTSA notes
that, in developing technology cost estimates, the agencies have made
every effort to hold constant aspects of vehicle performance and
utility typically valued by consumers, such as horsepower, carrying
capacity, drivability, durability, noise, vibration and harshness (NVH)
and towing and hauling capacity. For example, NHTSA includes in its
analysis technology cost estimates that are specific to performance
passenger cars (i.e., sports cars), as compared to nonperformance
passenger cars. NHTSA seeks comment on the extent to which commenters
believe that the agencies have been successful in holding constant
these elements of vehicle performance and utility in developing the
technology cost estimates. Additionally, the agency notes that the
technology costs included in this proposal take into account only those
associated with the initial build of the vehicle. Although comments
were received to the MYs 2012-2016 rulemaking that suggested there
could be additional maintenance required with some new technologies
(e.g., turbocharging, hybrids, etc.), and that additional maintenance
costs could occur as a result. The agency requests comments on this
topic and will undertake a more detailed review of these potential
costs for the final rule.
Additionally, NHTSA recognizes that manufacturers' actual costs for
employing these technologies include additional outlays for
accompanying design or engineering changes to models that use them,
development and testing of prototype versions, recalibrating engine
operating parameters, and integrating the technology with other
attributes of the vehicle. Manufacturers' indirect costs for employing
these technologies also include expenses for product development and
integration, modifying assembly processes and training assembly workers
to install them, increased expenses for operation and maintaining
assembly lines, higher initial warranty costs for new technologies, any
added expenses for selling and distributing vehicles that use these
technologies, and manufacturer and dealer profit. These indirect costs
have been accounted for in this rulemaking through use of ICMs, which
have been revised for this rulemaking as discussed above, in Chapter 3
of the draft joint TSD, and in Chapters V and VII of NHTSA's PRIA.
b. Potential Opportunity Costs of Improved Fuel Economy
An important concern is whether achieving the fuel economy
improvements required by the proposed CAFE standards will require
manufacturers to modify the performance, carrying capacity, safety, or
comfort of some vehicle models. To the extent that it does so, the
resulting sacrifice in the value of those models represents an
additional cost of achieving the required improvements in fuel economy.
(This possibility is addressed in detail in Section IV.G.6.) Although
exact dollar values that potential buyers attach to specific vehicle
attributes are difficult to infer, differences in vehicle purchase
prices and buyers' choices among competing models that feature varying
combinations of these characteristics clearly demonstrate that changes
in these attributes affect the utility and economic value they offer to
potential buyers.\639\
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\639\ See, e.g., Kleit A.N., 1990. ``The Effect of Annual
Changes in Automobile Fuel Economy Standards.'' Journal of
Regulatory Economics 2: 151-172 (Docket EPA-HQ-OAR-2009-0472-0015);
Berry, Steven, James Levinsohn, and Ariel Pakes, 1995. ``Automobile
Prices in Market Equilibrium,'' Econometrica 63(4): 841-940 (Docket
NHTSA-2009-0059-0031); McCarthy, Patrick S., 1996.
---------------------------------------------------------------------------
NHTSA and EPA have approached this potential problem by developing
cost estimates for fuel economy-improving technologies that include any
additional manufacturing costs that would be necessary to maintain the
originally planned levels of performance, comfort, carrying capacity,
and safety of any light-duty vehicle model to which those technologies
are applied. In doing so, the agencies followed the precedent
established by the 2002 NAS Report, which estimated ``constant
performance and utility'' costs for fuel economy technologies. NHTSA
has followed this precedent in its efforts to refine the technology
costs it uses to analyze alternative passenger car and light truck CAFE
standards for MYs 2017-2025. Although the agency has reduced its
estimates of manufacturers' costs for most technologies for use in this
rulemaking, these revised estimates are still intended to represent
costs that would allow manufacturers to maintain the performance,
carrying capacity, and utility of vehicle models while improving their
fuel economy.
While we believe that our cost estimates for fuel economy-improving
technologies include adequate provisions for accompanying costs that
are necessary to prevent any degradation in other vehicle attributes,
it is possible that they do not include adequate allowance to prevent
sacrifices in these attributes on all vehicle models. If this is the
case, the true economic costs of achieving higher fuel economy should
include the opportunity costs to vehicle owners of any accompanying
reductions vehicles' performance, carrying capacity, and utility, and
omitting these will cause the agency's estimated technology costs to
underestimate the true economic costs of improving fuel economy.
It would be desirable to estimate explicitly the changes in vehicle
buyers' welfare from the combination of higher prices for new vehicle
models, increases in their fuel economy, and any accompanying changes
in other vehicle attributes. The net change in buyer's welfare that
results from the combination of these changes would provide a more
accurate estimate of the true economic costs for improving fuel
economy. The agency is in the process of developing a model of
potential vehicle buyers' decisions about whether to purchase a new car
or light truck and their choices from among the available models, which
will allow it to conduct such an analysis. This process is expected to
be completed for use in analyzing final CAFE standards for MY 2017-25;
in the meantime, Section IV.G.6 below includes a detailed analysis and
discussion of how omitting possible changes in vehicle attributes other
than their prices and fuel economy might affect its estimates of
benefits and costs resulting from the standards proposed in this NPRM.
c. The On-Road Fuel Economy ``Gap''
Actual fuel economy levels achieved by light-duty vehicles in on-
road driving fall somewhat short of their levels measured under the
laboratory-like test conditions used by EPA to establish its published
fuel economy ratings for different models. In analyzing the fuel
savings from alternative CAFE standards, NHTSA has previously adjusted
the actual fuel economy performance of each light truck model downward
from its rated value to reflect the expected size of this on-road fuel
economy ``gap.'' On December 27, 2006, EPA adopted changes to its
regulations on fuel economy labeling, which were intended to bring
vehicles' rated fuel economy levels closer to their actual on-road fuel
economy levels.\640\
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\640\ 71 FR 77871 (Dec. 27, 2006).
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In its Final Rule, however, EPA estimated that actual on-road fuel
[[Page 75203]]
economy for light-duty vehicles averages approximately 20 percent lower
than published fuel economy levels, somewhat larger than the 15 percent
shortfall it had previously assumed. For example, if the overall EPA
fuel economy rating of a light truck is 20 mpg, EPA estimated that the
on-road fuel economy actually achieved by a typical driver of that
vehicle is expected to be only 80 percent of that figure, or 16 mpg
(20*.80). NHTSA employed EPA's revised estimate of this on-road fuel
economy gap in its analysis of the fuel savings resulting from
alternative CAFE standards evaluated in the MY 2011 final rule.
In the course of developing its CAFE standards for MY 2012-16,
NHTSA conducted additional analysis of this issue. The agency used data
on the number of passenger cars and light trucks of each model year
that were registered for use during calendar years 2000 through 2006,
average rated fuel economy for passenger cars and light trucks produced
during each model year, and estimates of average miles driven per year
by cars and light trucks of different ages. These data were combined to
develop estimates of the average fuel economy that the U.S. passenger
vehicle fleet would have achieved from 2000 through 2006 if cars and
light trucks of each model year achieved the same fuel economy levels
in actual on-road driving as they did under test conditions when new.
Table IV-8 compares NHTSA's estimates of fleet-wide average fuel
economy under test conditions for 2000 through 2006 to the Federal
Highway Administration's (FHWA) published estimates of actual on-road
fuel economy achieved by passenger cars and light trucks during each of
those years.\641\ As it shows, FHWA's estimates of actual fuel economy
for passenger cars ranged from 21-23 percent lower than NHTSA's
estimates of its fleet-wide average value under test conditions over
this period, and FHWA's estimates of actual fuel economy for light
trucks ranged from 16-18 percent lower than NHTSA's estimates of its
fleet-wide average value under test conditions. Thus, these results
appear to confirm that the 20 percent on-road fuel economy gap
represents a reasonable estimate for use in evaluating the fuel savings
likely to result from more stringent fuel economy and CO2
standards in MYs 2017-2025.
---------------------------------------------------------------------------
\641\ Federal Highway Administration, Highway Statistics, 2000
through 2006 editions, Table VM-1; See http://www.fhwa.dot.gov/policy/ohpi/hss/hsspubs.cfm (last accessed March 1, 2010).
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[[Page 75204]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.177
The comparisons reported in this table must be interpreted with
some caution, however, because the estimates of annual car and truck
use used to develop these estimates are submitted to FHWA by individual
states, which use differing definitions of passenger cars and light
trucks. (For example, some states classify minivans as cars, while
others define them as light trucks.) At the same time, while total
gasoline consumption can be reasonably estimated from excise tax
receipts, separate estimates of gasoline consumption by cars and trucks
are not available. For these reasons, NHTSA has chosen not to rely on
its separate estimates of the on-road fuel economy gap for cars and
light trucks. However, the agency does believe that these results
confirm that the 20 percent on-road fuel economy discount represents a
reasonable estimate for use in evaluating the fuel savings likely to
result from CAFE standards for both cars and light trucks. NHTSA
employs this value for vehicles operating on liquid fuels (gasoline,
diesel, and gasoline/alcohol blends), and uses it to analyze the
impacts of proposed CAFE standards for model years 2017-25 on the use
of these fuels.
In the recent TAR, EPA and NHTSA assumed that the overall energy
shortfall for the vehicles employing electric drivetrains, including
plug-in hybrid and battery-powered electric vehicles, is 30 percent.
This value was derived from the agencies' engineering judgment based on
the limited available information. During the stakeholder meetings
conducted prior to the technical assessment, confidential business
information (CBI) was supplied by several manufacturers which indicated
that electrically powered vehicles had greater variability in their on-
road energy consumption than vehicles powered by internal combustion
engines, although other manufacturers suggested that the on-road/
laboratory differential attributable to electric operation should
approach that of liquid fuel operation in the future. Second, data from
EPA's 2006 analysis of the ``five cycle'' fuel economy label as part of
the rulemaking discussed above supported a larger on-road shortfall for
vehicles with hybrid-electric drivetrains, partly because real-world
driving tends to have higher acceleration/deceleration rates than are
employed on the 2-cycle test. This
[[Page 75205]]
diminishes the fuel economy benefits of regenerative braking, which can
result in a higher test fuel economy for hybrids than is achieved under
normal on-road conditions.\642\ Finally, heavy accessory load,
extremely high or low temperatures, and aggressive driving have
deleterious impacts of unknown magnitudes on battery performance.
Consequently, the agencies judged that 30 percent was a reasonable
estimate for use in the TAR, and NHTSA believes that it continues to
represent the most reliable estimate for use in the current analysis.
---------------------------------------------------------------------------
\642\ EPA, Fuel Economy Labeling of Motor Vehicles: Revisions To
Improve Calculation of Fuel Economy Estimates; Final Rule, 40 CFR
parts 86 and 600, 71 FR 77872, 77879 (Dec. 27, 2006). Available at
http://www.epa.gov/fedrgstr/EPA-AIR/2006/December/Day-27/a9749.pdf.
---------------------------------------------------------------------------
One of the most significant factors responsible for the difference
between test and on-road fuel economy is the use of air conditioning.
While the air conditioner is turned off during the FTP and HFET tests,
drivers often use air conditioning under warm, humid conditions. The
air conditioning compressor can also be engaged during ``defrost''
operation of the heating system.\643\ In the MYs 2012-2016 rulemaking,
EPA estimated the impact of an air conditioning system at approximately
14.3 grams CO2/mile for an average vehicle without any of
the improved air conditioning technologies discussed in that
rulemaking. For a 27 mpg (330 g CO2/mile) vehicle, this
would account for is approximately 20 percent of the total estimated
on-road gap (or about 4 percent of total fuel consumption).
---------------------------------------------------------------------------
\643\ EPA, Final Technical Support Document: Fuel Economy
Labeling of Motor Vehicle Revisions to Improve Calculation of Fuel
Economy Estimates, at 70. Office of Transportation and Air Quality
EPA420-R-06-017 December 2006, Chapter II, http://www.epa.gov/fueleconomy/420r06017.pdf.
---------------------------------------------------------------------------
In the MY 2012-2016 rule, EPA estimated that 85 percent of MY 2016
vehicles would reduce their tailpipe CO2 emissions
attributable to air conditioner efficiency by 40 percent through the
use of advanced air conditioning technologies, and that incorporating
this change would reduce the average on-road gap by about 2
percent.\644\ However, air conditioning-related fuel consumption does
not decrease proportionally as engine efficiency improves, because the
engine load due attributable to air conditioner operation is
approximately constant across engine efficiency and technology. As a
consequence, air conditioning operation represents an increasing
percentage of vehicular fuel consumption as engine efficiency
increases.\645\ Because these two effects are expected approximately to
counterbalance each other, NHTSA has elected not to adjust its estimate
of the on-road gap for use in this proposal.
---------------------------------------------------------------------------
\644\ 4% of the on-road gap x 40% reduction in air conditioning
fuel consumption x 85% of the fleet = ~2%.
\645\ As an example, the air conditioning load of 14.3 g/mile of
CO2 is a smaller percentage (4.3%) of 330 g/mile than 260
(5.4%).
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d. Fuel Prices and the Value of Saving Fuel
Future fuel prices are the single most important input into the
economic analysis of the benefits of alternative CAFE standards because
they determine the value of future fuel savings, which account for
approximately 90% of total economic benefits from requiring higher fuel
economy. NHTSA relies on the most recent fuel price projections from
the U.S. Energy Information Administration's (EIA) Annual Energy
Outlook (AEO) 2011 Reference Case to estimate the economic value of
fuel savings projected to result from alternative CAFE standards for MY
2017-25. The AEO 2011 Reference Case forecasts of gasoline and diesel
fuel prices represents EIA's most up-to-date estimate of the most
likely course of future prices for petroleum products. EIA is widely
recognized as an impartial and authoritative source of analysis and
forecasts of U.S. energy production, consumption, and prices, and its
forecasts are widely relied upon by federal agencies for use in
regulatory analysis and for other purposes. Its forecasts are derived
using EIA's National Energy Modeling System (NEMS), which includes
detailed representations of supply pathways, sources of demand, and
their interaction to determine prices for different forms of energy.
As compared to the gasoline prices used in NHTSA's Final Rule
establishing CAFE standards for MY 2012-2016 (which relied on forecasts
from AEO 2010), the AEO 2011 Reference Case fuel prices are slightly
higher through the year 2020, but slightly lower for most years
thereafter. Expressed in constant 2009 dollars, the AEO 2011 Reference
Case forecast of retail gasoline prices (which include federal, state,
and local taxes) during 2017 is $3.25 per gallon, rising gradually to
$3.71 by the year 2035. However, valuing fuel savings over the full
lifetimes of passenger cars and light trucks affected by the standards
proposed for MYs 2017-25 requires fuel price forecasts that extend
through 2060, approximately the last year during which a significant
number of MY 2025 vehicles will remain in service.\646\ To obtain fuel
price forecasts for the years 2036 through 2060, the agency assumes
that retail fuel prices will continue to increase after 2035 at the
average annual rate (0.7%) projected for 2017-2035 in the AEO 2011
Reference Case. This assumption results in a projected retail price of
gasoline that reaches $4.16 in 2050. Over the entire period from 2017-
2050, retail gasoline prices are projected to average $3.67, as Table
IV-7 reported previously.
---------------------------------------------------------------------------
\646\ The agency defines the maximum lifetime of vehicles as the
highest age at which more than 2 percent of those originally
produced during a model year remain in service. In the case of light
trucks, for example, this age has typically been 36 years for recent
model years.
---------------------------------------------------------------------------
The value of fuel savings resulting from improved fuel economy to
buyers of light-duty vehicles is determined by the retail price of
fuel, which includes Federal, State, and any local taxes imposed on
fuel sales. Because fuel taxes represent transfers of resources from
fuel buyers to government agencies, however, rather than real resources
that are consumed in the process of supplying or using fuel, NHTSA
deducts their value from retail fuel prices to determine the value of
fuel savings resulting from more stringent CAFE standards to the U.S.
economy.
NHTSA follows the assumptions used by EIA in AEO 2011 that State
and local gasoline taxes will keep pace with inflation in nominal
terms, and thus remain constant when expressed in constant dollars. In
contrast, EIA assumes that Federal gasoline taxes will remain unchanged
in nominal terms, and thus decline throughout the forecast period when
expressed in constant dollars. These differing assumptions about the
likely future behavior of Federal and State/local fuel taxes are
consistent with recent historical experience, which reflects the fact
that Federal as well as most State motor fuel taxes are specified on a
cents-per-gallon rather than an ad valorem basis, and typically require
legislation to change. Subtracting fuel taxes from the retail prices
forecast in AEO 2011 results in projected values for saving gasoline of
$3.29 per gallon during 2017, rising to $3.48 per gallon by the year
2035, and to $3.65 by the year 2050. Over this entire period, pre-tax
gasoline prices are projected to average $3.32 per gallon.
EIA also includes forecasts reflecting high and low global oil
prices in each year's complete AEO, which reflect uncertainties
regarding OPEC behavior as well as future levels of oil production and
demand. These alternative scenarios project retail gasoline prices that
range from a low of $2.30 to a high
[[Page 75206]]
of $4.85 per gallon during 2020, and from $2.12 to $5.36 per gallon
during 2035 (all figures in 2009 dollars). In conjunction with our
assumption that fuel taxes will remain constant in real or inflation-
adjusted terms over this period, these forecasts imply pre-tax values
of saving fuel ranging from $1.91 to $4.46 per gallon during 2020, and
from $1.77 to $5.01 per gallon in 2035 (again, all figures are in
constant 2009 dollars). In conducting the analysis of uncertainty in
benefits and costs from alternative CAFE standards required by OMB,
NHTSA evaluated the sensitivity of its benefits estimates to these
alternative forecasts of future fuel prices; detailed results and
discussion of this sensitivity analysis can be found in the agency's
PRIA. Generally, this analysis confirms that the primary economic
benefit resulting from the rule--the value of fuel savings--is
extremely sensitive to alternative forecasts of future fuel prices.
e. Consumer Valuation of Fuel Economy and Payback Period
The agency uses slightly different assumptions about the length of
time over which potential vehicle buyers consider fuel savings from
higher fuel economy, and about how they discount those future fuel
savings, in different aspects of its analysis. For most purposes, the
agency assumes that buyers value fuel savings over the first five years
of a new vehicle's lifetime; the five-year figure represents
approximately the current average term of consumer loans to finance the
purchase of new vehicles.
To simulate manufacturers' assessment of the net change in the
value of an individual vehicle model to prospective buyers from
improving its fuel economy, NHTSA discounts fuel savings over the first
five years of its lifetime using a 7 percent rate. The resulting value
is deducted from the technology costs that would be incurred by its
manufacturer to improve that model's fuel economy, in order to
determine the change in its value to potential buyers. Since this is
also the additional amount its manufacturer could expect to receive
when selling the vehicle after improving its fuel economy, this can
also be viewed as the ``effective cost'' of the improvement from its
manufacturers' perspective. The CAFE model uses these estimates of
effective costs to identify the sequence in which manufacturers are
likely to select individual models for improvements in fuel economy, as
well as to identify the most cost-effective technologies for doing so.
The average of effective cost to its manufacturer for increasing
the fuel economy of a model also represents the change in its value
from the perspective of potential buyers. Under the assumption that
manufacturers change the selling price of each model by this amount,
its average value also represents the average change in its net or
effective price to would-be buyers. As part of our sensitivity case
analyzing the potential for manufacturers to over-comply with CAFE
standards--that is, to produce a lineup of vehicle models whose sales-
weighted average fuel economy exceeds that required by prevailing
standards--NHTSA used the extreme assumption that potential buyers
value fuel savings only during the first year they expect to own a new
vehicle.
The agency notes that these varying assumptions about future time
horizons and discount rates for valuing fuel savings are used only to
analyze manufacturers' responses to requiring higher fuel economy and
buyers' behavior in response to manufacturers' compliance strategies.
When estimating the aggregate value to the U.S. economy of fuel savings
resulting from alternative increases in CAFE standards--or the
``social'' value of fuel savings--the agency includes fuel savings over
the entire expected lifetimes of vehicles that would be subject to
higher standards, rather than over the shorter periods we assume
manufacturers employ to represent the preferences of vehicle buyers, or
that buyers use to assess changes in the net price or new vehicles.
Valuing fuel savings over vehicles' entire lifetimes recognizes the
savings in fuel costs that subsequent owners of vehicles will
experience from higher fuel economy, even if their initial purchasers
do not expect to recover the remaining value of fuel savings when they
re-sell those vehicles, or for other reasons do not value fuel savings
beyond the assumed five-year time horizon. The agency acknowledges that
it has not accounted for any effects of increased costs for financing,
insuring, or maintaining vehicles with higher fuel economy, over either
this limited payback period or the full lifetimes of vehicles.
The procedure the agency uses for calculating lifetime fuel savings
is discussed in detail in the following section, while discussion about
the time horizon over which potential buyers may consider fuel savings
in their vehicle purchasing decisions is provided in more detail in
Section IV.G.6 below.
f. Vehicle Survival and Use Assumptions
NHTSA's analysis of fuel savings and related benefits from adopting
more stringent fuel economy standards for MYs 2017-2025 passenger cars
and light trucks begins by estimating the resulting changes in fuel use
over the entire lifetimes of the affected vehicles. The change in total
fuel consumption by vehicles produced during each model year is
calculated as the difference between their total fuel use over their
lifetimes with a higher CAFE standard in effect, and their total
lifetime fuel consumption under a baseline in which CAFE standards
remained at their 2016 levels. The first step in estimating lifetime
fuel consumption by vehicles produced during a model year is to
calculate the number expected to remain in service during each year
following their production and sale.\647\ This is calculated by
multiplying the number of vehicles originally produced during a model
year by the proportion typically expected to remain in service at their
age during each later year, often referred to as a ``survival rate.''
---------------------------------------------------------------------------
\647\ Vehicles are defined to be of age 1 during the calendar
year corresponding to the model year in which they are produced;
thus for example, model year 2000 vehicles are considered to be of
age 1 during calendar year 2000, age 2 during calendar year 2001,
and to reach their maximum age of 26 years during calendar year
2025. NHTSA considers the maximum lifetime of vehicles to be the age
after which less than 2 percent of the vehicles originally produced
during a model year remain in service. Applying these conventions to
vehicle registration data indicates that passenger cars have a
maximum age of 26 years, while light trucks have a maximum lifetime
of 36 years. See Lu, S., NHTSA, Regulatory Analysis and Evaluation
Division, ``Vehicle Survivability and Travel Mileage Schedules,''
DOT HS 809 952, 8-11 (January 2006). Available at http://www-nrd.nhtsa.dot.gov/Pubs/809952.pdf (last accessed Sept. 26, 2011).
---------------------------------------------------------------------------
As discussed in more detail in Section II.B.3 above and in Chapter
1 of the TSD, to estimate production volumes of passenger cars and
light trucks for individual manufacturers, NHTSA relied on a baseline
market forecast constructed by EPA staff beginning with MY 2008 CAFE
certification data. After constructing a MY 2008 baseline, EPA and
NHTSA used projected car and truck volumes for this period from Energy
Information Administration's (EIA's) Annual Energy Outlook (AEO) 2011
in the NPRM analysis.\648\ However,
[[Page 75207]]
Annual Energy Outlook forecasts only total car and light truck sales,
rather than sales at the manufacturer and model-specific level, which
the agencies require in order to estimate the effects new standards
will have on individual manufacturers.\649\
---------------------------------------------------------------------------
\648\ Available at http://www.eia.gov/forecasts/aeo/index.cfm
(last accessed Sept. 26, 2011). NHTSA and EPA made the simplifying
assumption that projected sales of cars and light trucks during each
calendar year from 2012 through 2016 represented the likely
production volumes for the corresponding model year. The agency did
not attempt to establish the exact correspondence between projected
sales during individual calendar years and production volumes for
specific model years.
\649\ Because AEO 2011's ``car'' and ``truck'' classes did not
reflect NHTSA's recent reclassification (in March 2009 for
enforcement beginning MY 2011) of many two wheel drive SUVs from the
non-passenger (i.e., light truck) fleet to the passenger car fleet,
EPA staff made adjustments to account for such vehicles in the
baseline.
---------------------------------------------------------------------------
To estimate sales of individual car and light truck models produced
by each manufacturer, EPA purchased data from CSM Worldwide and used
its projections of the number of vehicles of each type (car or truck)
that will be produced and sold by manufacturers in model years 2011
through 2015.\650\ This provided year-by-year estimates of the
percentage of cars and trucks sold by each manufacturer, as well as the
sales percentages accounted for by each vehicle market segment. (The
distributions of car and truck sales by manufacturer and by market
segment for the 2016 model year and beyond were assumed to be the same
as CSM's forecast for the 2015 calendar year.) Normalizing these
percentages to the total car and light truck sales volumes projected
for 2017 through 2025 in AEO 2011 provided manufacturer-specific market
share and model-specific sales estimates for those model years. The
volumes were then scaled to AEO 2011 total volume for each year.
---------------------------------------------------------------------------
\650\ EPA also considered other sources of similar information,
such as J.D. Powers, and concluded that CSM was better able to
provide forecasts at the requisite level of detail for most of the
model years of interest.
---------------------------------------------------------------------------
To estimate the number of passenger cars and light trucks
originally produced during model years 2017 through 2025 that will
remain in use during subsequent years, the agency applied age-specific
survival rates for cars and light trucks to its forecasts of passenger
car and light truck sales for each of those model years. In 2008, NHTSA
updated its previous estimates of car and light truck survival rates
using the most current registration data for vehicles produced during
recent model years, in order to ensure that they reflected recent
increases in the durability and expected life spans of cars and light
trucks.\651\ However, the agency does not attempt to forecast changes
in those survival rates over the future.
---------------------------------------------------------------------------
\651\ Lu, S., NHTSA, Regulatory Analysis and Evaluation
Division, ``Vehicle Survivability and Travel Mileage Schedules,''
DOT HS 809 952, 8-11 (January 2006). Available at http://www-nrd.nhtsa.dot.gov/Pubs/809952.pdf (last accessed Sept. 26, 2011).
These updated survival rates suggest that the expected lifetimes of
recent-model passenger cars and light trucks are 13.8 and 14.5
years.
---------------------------------------------------------------------------
The next step in estimating fuel use is to calculate the total
number of miles that cars and light trucks remaining in use will be
driven each year. To estimate the total number of miles driven by cars
or light trucks produced in a model year during each subsequent year,
the number projected to remain in use during that year is multiplied by
the average number of miles those vehicles are expected to be driven at
the age they will have reached in that year. The agency estimated
annual usage of cars and light trucks of each age using data from the
Federal Highway Administration's 2001 National Household Travel Survey
(NHTS).\652\ Because these estimates reflect the historically low
gasoline prices that prevailed at the time the 2001 NHTS was conducted,
however, NHTSA adjusted them to account for the effect on vehicle use
of the higher fuel prices projected over the lifetimes of model year
2017-25 cars and light trucks. Details of this adjustment are provided
in Chapter VIII of the PRIA and Chapter 4 of the draft Joint TSD.
---------------------------------------------------------------------------
\652\ For a description of the Survey, see http://nhts.ornl.gov/introduction.shtml#2001 (last accessed September 26, 2011).
---------------------------------------------------------------------------
The estimates of annual miles driven at different vehicle ages
derived from the 2001 NHTS were also adjusted to reflect projected
future growth in average use for vehicles at every age over their
lifetimes. Increases in average annual use of cars and light trucks,
which have averaged approximately 1 percent annually over the past two
decades, have been an important source of historical growth in the
total number of miles they are driven each year. To estimate future
growth in their average annual use for purposes of this rulemaking,
NHTSA calculated the rate of growth in the adjusted mileage schedules
derived from the 2001 NHTS that would be necessary for total car and
light truck travel to increase at the rate forecast in the AEO 2011
Reference Case.\653\ This rate was calculated to be consistent with
future changes in the overall size and age distributions of the U.S.
passenger car and light truck fleets that result from the agency's
forecasts of total car and light truck sales and updated survival
rates. The resulting growth rate in average annual car and light truck
use is approximately 1.1 percent from 2017 through 2030, and declines
to 0.5 percent per year thereafter. \654\ While the adjustment for
future fuel prices reduces average annual mileage at each age from the
values derived using the 2001 NHTS, the adjustment for expected future
growth in average vehicle use increases it. The net effect of these two
adjustments is to increase expected lifetime mileage for MY 2017-25
passenger cars and light trucks by about 22 percent from the estimates
originally derived from the 2001 NHTS.
---------------------------------------------------------------------------
\653\ This approach differs from that used in the MY 2011 final
rule, where it was assumed that future growth in the total number of
cars and light trucks in use resulting from projected sales of new
vehicles was adequate by itself to account for growth in total
vehicle use, without assuming continuing growth in average vehicle
use.
\654\ While the adjustment for future fuel prices reduces
average mileage at each age from the values derived from the 2001
NHTS, the adjustment for expected future growth in average vehicle
use increases it. The net effect of these two adjustments is to
increase expected lifetime mileage by about 18 percent significantly
for both passenger cars and about 16 percent for light trucks.
---------------------------------------------------------------------------
Finally, the agency estimated total fuel consumption by passenger
cars and light trucks remaining in use each year by dividing the total
number of miles surviving vehicles are driven by the fuel economy they
are expected to achieve under each alternative CAFE standard. Each
model year's total lifetime fuel consumption is the sum of fuel use by
the cars or light trucks produced during that model year over its life
span. In turn, the savings in lifetime fuel use by cars or light trucks
produced during each model year affected by this proposed rule that
will result from each alternative CAFE standard is the difference
between its lifetime fuel use at the fuel economy level it attains
under the Baseline alternative, and its lifetime fuel use at the higher
fuel economy level it is projected to achieve under that alternative
standard.\655\
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\655\ To illustrate these calculations, the agency's adjustment
of the AEO 2009 Revised Reference Case forecast indicates that 9.26
million passenger cars will be produced during 2012, and the
agency's updated survival rates show that 83 percent of these
vehicles, or 7.64 million, are projected to remain in service during
the year 2022, when they will have reached an age of 10 years. At
that age, passenger achieving the fuel economy level they are
projected to achieve under the Baseline alternative are driven an
average of about 800 miles, so surviving model year 2012 passenger
cars will be driven a total of 82.5 billion miles (= 7.64 million
surviving vehicles x 10,800 miles per vehicle) during 2022. Summing
the results of similar calculations for each year of their 26-year
maximum lifetime, model year 2012 passenger cars will be driven a
total of 1,395 billion miles under the Baseline alternative. Under
that alternative, they are projected to achieve a test fuel economy
level of 32.4 mpg, which corresponds to actual on-road fuel economy
of 25.9 mpg (= 32.4 mpg x 80 percent). Thus their lifetime fuel use
under the Baseline alternative is projected to be 53.9 billion
gallons (= 1,395 billion miles divided by 25.9 miles per gallon).
---------------------------------------------------------------------------
g. Accounting for the Fuel Economy Rebound Effect
The fuel economy rebound effect refers to the fact that some of the
fuel
[[Page 75208]]
savings expected to result from higher fuel economy, such as an
increase in fuel economy required by the adoption of higher CAFE
standards, may be offset by additional vehicle use. The increase in
vehicle use occurs because higher fuel economy reduces the fuel cost of
driving, which is typically the largest single component of the
monetary cost of operating a vehicle, and vehicle owners respond to
this reduction in operating costs by driving more. Even with their
higher fuel economy, this additional driving consumes some fuel, so
this effect reduces the fuel savings that result when raising CAFE
standards requires manufacturers to improve fuel economy. The rebound
effect refers to the fraction of fuel savings expected to result from
increased fuel economy that is offset by additional driving.\656\
---------------------------------------------------------------------------
\656\ Formally, the rebound effect is often expressed as the
elasticity of vehicle use with respect to the cost per mile driven.
Additionally, it is consistently expressed as a positive percentage
(rather than as a negative decimal fraction, as this elasticity is
normally expressed).
---------------------------------------------------------------------------
The magnitude of the rebound effect is an important determinant of
the actual fuel savings that are likely to result from adopting
stricter CAFE standards. Research on the magnitude of the rebound
effect in light-duty vehicle use dates to the early 1980s, and
generally concludes that a significant rebound effect occurs when
vehicle fuel efficiency improves.\657\ The most common approach to
estimating its magnitude has been to analyze survey data on household
vehicle use, fuel consumption, fuel prices, and other factors affecting
household travel behavior to estimate the response of vehicle use to
differences in the fuel efficiency of individual vehicles. Because this
approach most closely matches the definition of the rebound effect,
which is the response of vehicle use to differences in fuel economy,
the agency regards these studies as likely to produce the most reliable
estimates of the rebound effect. Other studies have relied on
econometric analysis of annual U.S. data on vehicle use, fuel
efficiency, fuel prices, and other variables to estimate the response
of total or average vehicle use to changes in fleet-wide average fuel
economy and its effect on fuel cost per mile driven. More recent
studies have analyzed yearly variation in vehicle ownership and use,
fuel prices, and fuel economy among states over an extended time period
in order to measure the response of vehicle use to changing fuel costs
per mile.\658\
---------------------------------------------------------------------------
\657\ Some studies estimate that the long-run rebound effect is
significantly larger than the immediate response to increased fuel
efficiency. Although their estimates of the adjustment period
required for the rebound effect to reach its long-run magnitude
vary, this long-run effect is probably more appropriate for
evaluating the fuel savings and emissions reductions resulting from
stricter standards that would apply to future model years.
\658\ In effect, these studies treat U.S. states as a data
``panel'' by applying appropriate estimation procedures to data
consisting of each year's average values of these variables for the
separate states.
---------------------------------------------------------------------------
Another important distinction among studies of the rebound effect
is whether they assume that the effect is constant, or allow it to vary
in response to changes in fuel costs, personal income, or vehicle
ownership. Most studies using aggregate annual data for the U.S. assume
a constant rebound effect, although some of these studies test whether
the effect varies as changes in retail fuel prices or average fuel
efficiency alter fuel cost per mile driven. Studies using household
survey data estimate significantly different rebound effects for
households owning varying numbers of vehicles, with most concluding
that the rebound effect is larger among households that own more
vehicles. Finally, recent studies using state-level data conclude that
the rebound effect varies directly in response to changes in personal
income, the degree of urbanization of U.S. cities, and differences in
traffic congestion levels, as well as fuel costs. Some studies conclude
that the long-run rebound effect is significantly larger than the
immediate response of vehicle use to increased fuel efficiency.
Although their estimates of the time required for the rebound effect to
reach its long-run magnitude vary, this long-run effect is probably
more appropriate for evaluating the fuel savings likely to result from
adopting stricter CAFE standards for future model years.
In order to provide a more comprehensive overview of previous
estimates of the rebound effect, NHTSA has updated its previous review
of published studies of the rebound effect to include those conducted
as recently as 2010. The agency performed a detailed analysis of
several dozen separate estimates of the long-run rebound effect
reported in these studies, which is summarized in Table IV-9
below.\659\ As the table indicates, these estimates range from as low
as 7 percent to as high as 75 percent, with a mean value of 23 percent.
Both the type of data used and authors' assumption about whether the
rebound effect varies over time have important effects on its estimated
magnitude. The 34 estimates derived from analysis of U.S. annual time-
series data produce a mean estimate of 18 percent for the long-run
rebound effect, while the mean of 23 estimates based on household
survey data is considerably larger (31 percent), and the mean of 15
estimates based on pooled state data (23 percent) is close to that for
the entire sample. The 37 estimates assuming a constant rebound effect
produce a mean of 23 percent, identical to the mean of the 29 estimates
reported in studies that allowed the rebound effect to vary in response
to fuel prices and fuel economy levels, vehicle ownership, or household
income. Updated to reflect the most recent available information on
these variables, the mean of these estimates is 19 percent, as Table
IV-9 reports.
---------------------------------------------------------------------------
\659\ In some cases, NHTSA derived estimates of the overall
rebound effect from more detailed results reported in the studies.
For example, where studies estimated different rebound effects for
households owning different numbers of vehicles but did not report
an overall value, the agency computed a weighted average of the
reported values using the distribution of households among vehicle
ownership categories.
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Some recent studies provide evidence that the rebound effect has
been declining over time. This result appears plausible for two
reasons: First, the responsiveness of vehicle use to variation in fuel
costs would be expected to decline as they account for a smaller
proportion of the total monetary cost of driving, which has been the
case until recently. Second, rising personal incomes would be expected
to reduce the sensitivity of vehicle use to fuel costs as the time
component of driving costs--which is likely to be related to income
levels--accounts for a larger fraction the total cost of automobile
travel. At the same time, however, rising incomes are strongly
associated with higher auto ownership levels, which increase
households' opportunities to substitute among vehicles in response to
varying fuel prices and differences in their fuel economy levels. This
is likely to increase the sensitivity of households' overall vehicle
use to differences in the fuel economy levels of individual vehicles.
Small and Van Dender combined time series data for states to
estimate the rebound effect, allowing its magnitude to vary in response
to fuel prices, fleet-wide average fuel economy, the degree of
urbanization of U.S. cities, and personal income levels.\660\ The
authors employ a model that allows the effect of fuel cost per mile on
vehicle use to vary in response to changes in personal income levels
and increasing urbanization of U.S. cities. For the time period 1966-
2001, their analysis implied a long-run rebound effect of 22 percent,
which is consistent with previously published studies. Continued growth
in personal incomes over this period reduces their estimate of the
long-run rebound effect during its last five years (1997-2001) to 11
percent, and an unpublished update through 2004 prepared by the authors
reduced their estimate of the long-run rebound effect for the period
2000-2004 to 6 percent.\661\
---------------------------------------------------------------------------
\660\ Small, K. and K. Van Dender, 2007a. ``Fuel Efficiency and
Motor Vehicle Travel: The Declining Rebound Effect'', The Energy
Journal, vol. 28, no. 1, pp. 25-51.
\661\ Small, K. and K. Van Dender, 2007b. ``Long Run Trends in
Transport Demand, Fuel Price Elasticities and Implications of the
Oil Outlook for Transport Policy,'' OECD/ITF Joint Transport
Research Centre Discussion Papers 2007/16, OECD, International
Transport Forum.
---------------------------------------------------------------------------
More recently, Hymel, Small and Van Dender extended the previous
analysis to include traffic congestion levels in urbanized areas.\662\
Although controlling for the effect of congestion on vehicle use
increased their estimates of the rebound effect, these authors also
found that the rebound effect appeared to be declining over time. For
the time period 1966-2004, their estimate of the long-run rebound
effect was 24 percent, while for the last year of that period their
estimate was 13 percent, significantly above the previous Small and Van
Dender estimate of a 6 percent
[[Page 75211]]
rebound effect for the period 2000-2004.
---------------------------------------------------------------------------
\662\ Hymel, Kent M., Kenneth A. Small, and Kurt Van Dender,
``Induced demand and rebound effects in road transport,''
Transportation Research Part B: Methodological, Volume 44, Issue 10,
December 2010, Pages 1220-1241, ISSN 0191-2615, DOI: 10.1016/
j.trb.2010.02.007.
---------------------------------------------------------------------------
Recent research by Greene (under contract to EPA) using U.S.
national time-series data for the period 1966-2007 lends further
support to the hypothesis that the rebound effect is declining over
time.\663\ Greene found that fuel prices had a statistically
significant impact on VMT, yet fuel efficiency did not, and statistical
testing rejected the hypothesis of equal elasticities of vehicle use
with respect to gasoline prices and fuel efficiency. Greene also tested
model formulations that allowed the effect of fuel cost per mile on
vehicle use to decline with rising per capita income; his preferred
form of this model produced estimates of the rebound effect that
declined to 12 percent in 2007.
---------------------------------------------------------------------------
\663\ Greene, David, ``Rebound 2007: Analysis of National Light-
Duty Vehicle Travel Statistics,'' February 9, 2010. This paper has
been accepted for an upcoming special issue of Energy Policy,
although the publication date has not yet been determined.
---------------------------------------------------------------------------
In light of findings from recent research, the agency's judgment is
that the apparent decline over time in the magnitude of the rebound
effect justifies using a value for future analysis that is lower than
many historical estimates, which average 15-25 percent. Because the
lifetimes of vehicles affected by the alternative CAFE standards
considered in this rulemaking will extend from 2017 until 2060, a value
that is at the low end of historical estimates appears to be
appropriate. Thus as it elected to do in its previous analysis of the
effects of raising CAFE standards for MY 2012-16 cars and light trucks,
NHTSA uses a 10 percent rebound effect in its analysis of fuel savings
and other benefits from higher CAFE standards for MY 2017-25 vehicles.
Recognizing the wide range of uncertainty surrounding its correct
value, however, the agency also employs estimates of the rebound effect
ranging from 5 to 20 percent in its sensitivity testing. The 10 percent
figure is at the low end of those reported in almost all previous
research, and it is also below most estimates of the historical and
current magnitude of the rebound effect developed by NHTSA. However,
other recent research--particularly that conducted by Small and Van
Dender and by Greene--suggests that the magnitude of the rebound effect
has declined over time, and is likely to continue to do so. As a
consequence, NHTSA concluded that a value at the low end of the
historical estimates reported here is likely to provide a more reliable
estimate of its magnitude during the future period spanned by NHTSA's
analysis of the impacts of this rule. The 10 percent estimate lies
between the 10-30 percent range of estimates for the historical rebound
effect reported in most previous research, and is at the upper end of
the 5-10 percent range of estimates for the future rebound effect
reported in recent studies. In summary, the 10 percent value was not
derived from a single estimate or particular study, but instead
represents a compromise between historical estimates and projected
future estimates. Chapter 4.2.5 of the Joint TSD reviews the relevant
literature and discusses in more depth the reasoning for the rebound
value used here.
h. Benefits From Increased Vehicle Use
The increase in vehicle use from the rebound effect provides
additional benefits to their users, who make more frequent trips or
travel farther to reach more desirable destinations. This additional
travel provides benefits to drivers and their passengers by improving
their access to social and economic opportunities away from home. As
evidenced by their decisions to make more frequent or longer trips when
improved fuel economy reduces their costs for driving, the benefits
from this additional travel exceed the costs drivers and passengers
incur in traveling these additional distances.
The agency's analysis estimates the economic benefits from
increased rebound-effect driving as the sum of fuel costs drivers incur
plus the consumer surplus they receive from the additional
accessibility it provides.\664\ NHTSA estimates the value of the
consumer surplus provided by added travel as one-half of the product of
the decline in fuel cost per mile and the resulting increase in the
annual number of miles driven, a standard approximation for changes in
consumer surplus resulting from small changes in prices. Because the
increase in travel depends on the extent of improvement in fuel
economy, the value of benefits it provides differs among model years
and alternative CAFE standards.
---------------------------------------------------------------------------
\664\ The consumer surplus provided by added travel is estimated
as one-half of the product of the decline in fuel cost per mile and
the resulting increase in the annual number of miles driven.
---------------------------------------------------------------------------
i. The Value of Increased Driving Range
Improving vehicles' fuel economy may also increase their driving
range before they require refueling. By extending the upper limit of
the range vehicles can travel before refueling is needed, the per-
vehicle average number of refueling trips per year is expected to
decline. This reduction in refueling frequency provides a time savings
benefit to owners.\665\
---------------------------------------------------------------------------
\665\ If manufacturers respond to improved fuel economy by
reducing the size of fuel tanks to maintain a constant driving
range, the resulting cost saving will presumably be reflected in
lower vehicle sales prices.
---------------------------------------------------------------------------
NHTSA estimated a number of parameters regarding consumers'
refueling habits using newly-available observational and interview data
from a 2010-2011 NASS study conducted at fueling stations throughout
the nation. A (non-exhaustive) list of key parameters derived from this
study is as follows: Average number of gallons of fuel purchased,
length of time to refuel and pay, length of time to drive to the
fueling station, primary reason for refueling, and number of adult
vehicle occupants.
Using these and other parameters (detailed explanation of
parameters and methodology provided in Chapter VIII of NHTSA's PRIA),
NHTSA estimated the decrease in number of refueling cycles for each
model year's fleet attributable to improvements in actual on-road MPG
resulting from the proposed CAFE standards. NHTSA acknowledges--and
adjusts for--the fact that many refueling trips occur for reasons other
than a low reading on the gas gauge (for example, many consumers refuel
on a fixed schedule). NHTSA separately estimated the value of vehicle-
hour refueling time and applied this to the projected decrease in
number of refueling cycles to estimate the aggregate fleet-wide value
of refueling time savings for each year that a given model year's
vehicles are expected to remain in service.
As noted in the PRIA, NHTSA assumed a constant fuel tank size in
estimating the impact of higher CAFE requirements on the frequency of
refueling. NHTSA seeks comment regarding this assumption. Specifically,
NHTSA seeks comment from manufacturers regarding their intention to
retain fuel tank size or driving range in their redesigned vehicles.
Will fuel economy improvements translate into increased driving range,
or will fuel tanks be reduced in size to maintain current driving
range?
j. Added Costs From Congestion, Crashes and Noise
Increased vehicle use associated with the rebound effect also
contributes to increased traffic congestion, motor vehicle accidents,
and highway noise. To estimate the economic costs associated with these
consequences of added driving, NHTSA applies estimates of per-mile
congestion, accident, and noise costs caused by
[[Page 75212]]
increased use of automobiles and light trucks developed previously by
the Federal Highway Administration.\666\ These values are intended to
measure the increased costs resulting from added congestion and the
delays it causes to other drivers and passengers, property damages and
injuries in traffic accidents, and noise levels contributed by
automobiles and light trucks. NHTSA previously employed these estimates
in its analysis accompanying the MY 2011 final CAFE rule, as well as in
its analysis of the effects of higher CAFE standards for MY 2012-16.
After reviewing the procedures used by FHWA to develop them and
considering other available estimates of these values, the agency
continues to find them appropriate for use in this proposal. The agency
multiplies FHWA's estimates of per-mile costs by the annual increases
in automobile and light truck use from the rebound effect to yield the
estimated increases in congestion, accident, and noise externality
costs during each future year.
---------------------------------------------------------------------------
\666\ These estimates were developed by FHWA for use in its 1997
Federal Highway Cost Allocation Study; See http://www.fhwa.dot.gov/policy/hcas/final/index.htm (last accessed March 1, 2010).
---------------------------------------------------------------------------
k. Petroleum Consumption and Import Externalities
i. Changes in Petroleum Imports
Based on a detailed analysis of differences in fuel consumption,
petroleum imports, and imports of refined petroleum products among
alternative scenarios presented in AEO 2011, NHTSA estimates that
approximately 50 percent of the reduction in fuel consumption resulting
from adopting higher CAFE standards is likely to be reflected in
reduced U.S. imports of refined fuel, while the remaining 50 percent
would reduce domestic fuel refining.\667\ Of this latter figure, 90
percent is anticipated to reduce U.S. imports of crude petroleum for
use as a refinery feedstock, while the remaining 10 percent is expected
to reduce U.S. domestic production of crude petroleum.\668\ Thus on
balance, each 100 gallons of fuel saved as a consequence of higher CAFE
standards is anticipated to reduce total U.S. imports of crude
petroleum or refined fuel by 95 gallons.\669\
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\667\ Differences in forecast annual U.S. imports of crude
petroleum and refined products among the Reference, High Oil Price,
and Low Oil Price scenarios analyzed in EIA's Annual Energy Outlook
2011 range from 35-74 percent of differences in projected annual
gasoline and diesel fuel consumption in the U.S. These differences
average 53 percent over the forecast period spanned by AEO 2011.
\668\ Differences in forecast annual U.S. imports of crude
petroleum among the Reference, High Oil Price, and Low Oil Price
scenarios analyzed in EIA's Annual Energy Outlook 2011 range from
67-104 percent of differences in total U.S. refining of crude
petroleum, and average 90 percent over the forecast period spanned
by AEO 2011.
\669\ This figure is calculated as 50 gallons + 50 gallons * 90%
= 50 gallons + 45 gallons = 95 gallons.
---------------------------------------------------------------------------
ii. Benefits From Reducing U.S. Petroleum Imports
U.S. consumption and imports of petroleum products impose costs on
the domestic economy that are not reflected in the market price for
crude petroleum, or in the prices paid by consumers of petroleum
products such as gasoline. These costs include (1) Higher prices for
petroleum products resulting from the effect of U.S. petroleum demand
on the world oil price; (2) the risk of disruptions to the U.S. economy
caused by sudden reductions in the supply of imported oil to the U.S.;
and (3) expenses for maintaining a U.S. military presence to secure
imported oil supplies from unstable regions, and for maintaining the
strategic petroleum reserve (SPR) to cushion against resulting price
increases.\670\ Reducing these costs by lowering U.S. petroleum imports
represents another source of benefits from stricter CAFE standards and
the savings in consumption of petroleum-based fuels that would result
from higher fuel economy. Higher U.S. imports of crude oil or refined
petroleum products increase the magnitude of these external economic
costs, thus increasing the true economic cost of supplying
transportation fuels above their market prices. Conversely, lowering
U.S. imports of crude petroleum or refined fuels by reducing domestic
fuel consumption can reduce these external costs, and any reduction in
their total value that results from improved fuel economy represents an
economic benefit of more stringent CAFE standards, in addition to the
value of saving fuel itself.
---------------------------------------------------------------------------
\670\ See, e.g., Bohi, Douglas R. and W. David Montgomery
(1982). Oil Prices, Energy Security, and Import Policy, Washington,
DC: Resources for the Future, Johns Hopkins University Press; Bohi,
D.R. and M.A. Toman (1993). ``Energy and Security: Externalities and
Policies,'' Energy Policy 21:1093-1109 (Docket NHTSA-2009-0062-24);
and Toman, M.A. (1993). ``The Economics of Energy Security: Theory,
Evidence, Policy,'' in A.V. Kneese and J.L. Sweeney, eds. (1993)
(Docket NHTSA-2009-0062-23). Handbook of Natural Resource and Energy
Economics, Vol. III. Amsterdam: North-Holland, pp. 1167-1218.
---------------------------------------------------------------------------
The first component of the external costs imposed by U.S. petroleum
consumption and imports (often termed the ``monopsony cost'' of U.S.
oil imports), measures the increase in payments from domestic oil
consumers to foreign oil suppliers beyond the increased purchase price
of petroleum itself that results when increased U.S. import demand
raises the world price of petroleum.\671\ However, this monopsony cost
or premium represents a financial transfer from consumers of petroleum
products to oil producers, and does not entail the consumption of real
economic resources. Thus the decline in its value that occurs when
reduced U.S. demand for petroleum products causes a decline in global
petroleum prices produces no savings in economic resources globally or
domestically, although it does reduce the value of the financial
transfer from U.S. consumers of petroleum products to foreign suppliers
of petroleum. Accordingly, NHTSA's analysis of the benefits from
adopting proposed CAFE standards for MY 2017-2025 cars and light trucks
excludes the reduced value of monopsony payments by U.S. oil consumers
that would result from lower fuel consumption.
---------------------------------------------------------------------------
\671\ The reduction in payments from U.S. oil purchasers to
domestic petroleum producers is not included as a benefit, since it
represents a transfer that occurs entirely within the U.S. economy.
---------------------------------------------------------------------------
The second component of external costs imposed by U.S. petroleum
consumption and imports reflects the potential costs to the U.S.
economy from disruptions in the supply of imported petroleum. These
costs arise because interruptions in the supply of petroleum products
reduces U.S. economic output, as well as because firms are unable to
adjust prices, output levels, and their use of energy, labor and other
inputs smoothly and rapidly in response to the sudden changes in prices
for petroleum products that are caused by interruptions in their
supply. Reducing U.S. petroleum consumption and imports lowers these
potential costs, and the amount by which it does so represents an
economic benefit in addition to the savings in fuel costs that result
from higher fuel economy. NHTSA estimates and includes this value in
its analysis of the economic benefits from adopting higher CAFE
standards for MY 2017-2025 cars and light trucks.
The third component of external costs imposed by U.S. petroleum
consumption and imports includes expenses for maintaining a U.S.
military presence to secure imported oil supplies from unstable
regions, and for maintaining the strategic petroleum reserve (SPR) to
cushion against resulting price increases. NHTSA recognizes that
potential national and energy security risks exist due to the
possibility of tension over oil supplies. Much of the world's oil and
gas supplies are located in countries facing social, economic, and
demographic challenges,
[[Page 75213]]
thus making them even more vulnerable to potential local instability.
Because of U.S. dependence on oil, the military could be called on to
protect energy resources through such measures as securing shipping
lanes from foreign oil fields. Thus, to the degree to which the
proposed rules reduce reliance upon imported energy supplies or promote
the development of technologies that can be deployed by either
consumers or the nation's defense forces, the United States could
expect benefits related to national security, reduced energy costs, and
increased energy supply. Although NHTSA recognizes that there clearly
is a benefit to the United States from reducing dependence on foreign
oil, we have been unable to calculate the monetary benefit that the
United States will receive from the improvements in national security
expected to result from this program. We have therefore included only
the macroeconomic disruption portion of the energy security benefits to
estimate the monetary value of the total energy security benefits of
this program. We have calculated energy security in very specific
terms, as the reduction of both financial and strategic risks caused by
potential sudden disruptions in the supply of imported petroleum to the
U.S. Reducing the amount of oil imported reduces those risks, and thus
increases the nation's energy security.
Similarly, while the costs for building and maintaining the SPR are
more clearly attributable to U.S. petroleum consumption and imports,
these costs have not varied historically in response to changes in U.S.
oil import levels. Thus the agency has not attempted to estimate the
potential reduction in the cost for maintaining the SPR that might
result from lower U.S. petroleum imports, or to include an estimate of
this value among the benefits of reducing petroleum consumption through
higher CAFE standards.
In analyzing benefits from its recent actions to increase light
truck CAFE standards for model years 2005-07 and 2008-11, NHTSA relied
on a 1997 study by Oak Ridge National Laboratory (ORNL) to estimate the
value of reduced economic externalities from petroleum consumption and
imports.\672\ More recently, ORNL updated its estimates of the value of
these externalities, using the analytic framework developed in its
original 1997 study in conjunction with recent estimates of the
variables and parameters that determine their value.\673\ The updated
ORNL study was subjected to a detailed peer review commissioned by EPA,
and ORNL's estimates of the value of oil import externalities were
subsequently revised to reflect their comments and recommendations of
the peer reviewers.\674\ Finally, at the request of EPA, ORNL has
repeatedly revised its estimates of external costs from U.S. oil
imports to reflect changes in the outlook for world petroleum prices,
as well as continuing changes in the structure and characteristics of
global petroleum supply and demand.
---------------------------------------------------------------------------
\672\ Leiby, Paul N., Donald W. Jones, T. Randall Curlee, and
Russell Lee, Oil Imports: An Assessment of Benefits and Costs, ORNL-
6851, Oak Ridge National Laboratory, November 1, 1997. Available at
http://www.esd.ornl.gov/eess/energy_analysis/files/ORNL6851.pdf
(last accessed October 11, 2011).
\673\ Leiby, Paul N., ``Estimating the Energy Security Benefits
of Reduced U.S. Oil Imports,'' Oak Ridge National Laboratory, ORNL/
TM-2007/028, Revised July 23, 2007. Available at http://www.esd.ornl.gov/eess/energy_analysis/files/Leiby2007%20Estimating%20the%20Energy%20Security%20Benefits%20of%20Reduced%20U.S.%20Oil%20Imports%20ornl-tm-2007-028%20rev2007Jul25.pdf
(last accessed October 11, 2011).
\674\ Peer Review Report Summary: Estimating the Energy
Security Benefits of Reduced U.S. Oil Imports, ICF, Inc., September
2007. Available at Docket No. NHTSA-2009-0059-0160.
---------------------------------------------------------------------------
As the preceding discussion indicates, NHTSA's analysis of benefits
from adopting higher CAFE standards includes only the reduction in
economic disruption costs that is anticipated to result from reduced
consumption of petroleum-based fuels and the associated decline in U.S.
petroleum imports. ORNL's updated analysis reports that this benefit,
which is in addition to the savings in costs for producing fuel itself,
is most likely to amount to $0.185 per gallon of fuel saved by
requiring MY 2017-25 cars and light trucks to achieve higher fuel
economy. However, considerable uncertainty surrounds this estimate, and
ORNL's updated analysis also indicates that a range of values extending
from a low of $0.091 per gallon to a high of $0.293 per gallon should
be used to reflect this uncertainty.
We note that the calculation of energy security benefits does not
include energy security costs associated with reliance on foreign
sources of lithium and rare earth metals for HEVs and EVs. The agencies
intend to attempt to quantify this impact for the final rule stage, and
seek public input on information that would enable agencies to develop
this analysis. NHTSA also seeks public input on the projections that
energy security benefits will grow rapidly through 2025.
l. Air Pollutant Emissions
i. Changes in Criteria Air Pollutant Emissions
Criteria air pollutants include carbon monoxide (CO), hydrocarbon
compounds (usually referred to as ``volatile organic compounds,'' or
VOC), nitrogen oxides (NOX), fine particulate matter
(PM2.5), and sulfur oxides (SOX). These
pollutants are emitted during vehicle storage and use, as well as
throughout the fuel production and distribution system. While
reductions in domestic fuel refining, storage, and distribution that
result from lower fuel consumption will reduce emissions of these
pollutants, additional vehicle use associated with the fuel economy
rebound effect will increase their emissions. The net effect of
stricter CAFE standards on total emissions of each criteria pollutant
depends on the relative magnitude of reductions in its emissions during
fuel refining and distribution, and increases in its emissions
resulting from additional vehicle use. Because the relationship between
emissions in fuel refining and vehicle use is different for each
criteria pollutant, the net effect of fuel savings from the proposed
standards on total emissions of each pollutant is likely to differ.
With the exception of SO2, NHTSA calculated annual
emissions of each criteria pollutant resulting from vehicle use by
multiplying its estimates of car and light truck use during each year
over their expected lifetimes by per-mile emission rates for each
vehicle class, fuel type, model year, and age. These emission rates
were developed by U.S. EPA using its Motor Vehicle Emission Simulator
(MOVES 2010a).\675\ Emission rates for SO2 were calculated
by NHTSA using average fuel sulfur content estimates supplied by EPA,
together with the assumption that the entire sulfur content of fuel is
emitted in the form of SO2.\676\ Total SO2
emissions under each alternative CAFE standard were calculated by
applying the resulting emission rates directly to estimated annual
gasoline and diesel fuel use by cars and light trucks.
---------------------------------------------------------------------------
\675\ The MOVES model assumes that the per-mile rates at which
these pollutants are emitted are determined by EPA regulations and
the effectiveness of catalytic after-treatment of engine exhaust
emissions, and are thus unaffected by changes in car and light truck
fuel economy.
\676\ These are 30 and 15 parts per million (ppm, measured on a
mass basis) for gasoline and diesel respectively, which produces
emission rates of 0.17 grams of SO2 per gallon of
gasoline and 0.10 grams per gallon of diesel.
---------------------------------------------------------------------------
Changes in emissions of criteria air pollutants resulting from
alternative increases in CAFE standards for MY
[[Page 75214]]
2017-2025 cars and light trucks are calculated from the differences
between emissions under each alternative increase in CAFE standards,
and emissions under the baseline alternative.
Emissions of criteria air pollutants also occur during each phase
of fuel production and distribution, including crude oil extraction and
transportation, fuel refining, and fuel storage and transportation.
NHTSA estimates the reductions in criteria pollutant emissions from
producing and distributing fuel that would occur under alternative CAFE
standards using emission rates obtained by EPA from Argonne National
Laboratories' Greenhouse Gases and Regulated Emissions in
Transportation (GREET) model, which provides estimates of air pollutant
emissions that occur in different phases of fuel production and
distribution.677 678 EPA modified the GREET model to change
certain assumptions about emissions during crude petroleum extraction
and transportation, as well as to update its emission rates to reflect
adopted and pending EPA emission standards.
---------------------------------------------------------------------------
\677\ Argonne National Laboratories, The Greenhouse Gas and
Regulated Emissions in Transportation (GREET) Model, Version 1.8,
June 2007, available at http://www.transportation.anl.gov/modeling_simulation/GREET/index.html (last accessed October 11, 2011).
\678\ Emissions that occur during vehicle refueling at retail
gasoline stations (primarily evaporative emissions of volatile
organic compounds, or VOCs) are already accounted for in the
``tailpipe'' emission factors used to estimate the emissions
generated by increased light truck use. GREET estimates emissions in
each phase of gasoline production and distribution in mass per unit
of gasoline energy content; these factors are then converted to mass
per gallon of gasoline using the average energy content of gasoline.
---------------------------------------------------------------------------
The resulting emission rates were applied to the agency's estimates
of fuel consumption under alternative CAFE standards to develop
estimates of total emissions of each criteria pollutant during fuel
production and distribution. The agency then employed the estimates of
the effects of changes in fuel consumption on domestic and imported
sources of fuel supply discussed previously to calculate the effects of
reductions in fuel use on changes in imports of refined fuel and
domestic refining. NHTSA's analysis assumes that reductions in imports
of refined fuel would reduce criteria pollutant emissions during fuel
storage and distribution only. Reductions in domestic fuel refining
using imported crude oil as a feedstock are assumed to reduce emissions
during fuel refining, storage, and distribution. Finally, reduced
domestic fuel refining using domestically produced crude oil is assumed
to reduce emissions during all four phases of fuel production and
distribution.\679\
---------------------------------------------------------------------------
\679\ In effect, this assumes that the distances crude oil
travels to U.S. refineries are approximately the same regardless of
whether it travels from domestic oilfields or import terminals, and
that the distances that gasoline travels from refineries to retail
stations are approximately the same as those from import terminals
to gasoline stations. We note that while assuming that all changes
in upstream emissions result from a decrease in petroleum production
and transport, our analysis of downstream criteria pollutant impacts
assumes no change in the composition of the gasoline fuel supply.
---------------------------------------------------------------------------
Finally, NHTSA calculated the net changes in domestic emissions of
each criteria pollutant by summing the increases in emissions projected
to result from increased vehicle use, and the reductions anticipated to
result from lower domestic fuel refining and distribution.\680\ As
indicated previously, the effect of adopting higher CAFE standards on
total emissions of each criteria pollutant depends on the relative
magnitude of the resulting reduction in emissions from fuel refining
and distribution, and the increase in emissions from additional vehicle
use. Although these net changes vary significantly among individual
criteria pollutants, the agency projects that on balance, adopting
higher CAFE standards for MY 2017-25 cars and light trucks would reduce
emissions of all criteria air pollutants except carbon monoxide (CO).
---------------------------------------------------------------------------
\680\ All emissions from increased vehicle use are assumed to
occur within the U.S., since CAFE standards would apply only to
vehicles produced for sale in the U.S.
---------------------------------------------------------------------------
The net changes in direct emissions of fine particulates
(PM2.5) and other criteria pollutants that contribute to the
formation of ``secondary'' fine particulates in the atmosphere (such as
NOX, SOX, and VOCs) are converted to economic
values using estimates of the reductions in health damage costs per ton
of emissions of each pollutant that is avoided, which were developed by
EPA. These savings represent the estimated reductions in the value of
damages to human health resulting from lower atmospheric concentrations
and population exposure to air pollution that occur when emissions of
each pollutant that contributes to atmospheric PM2.5
concentrations are reduced. The value of reductions in the risk of
premature death due to exposure to fine particulate pollution
(PM2.5) accounts for a majority of EPA's estimated values of
reducing criteria pollutant emissions, although the value of avoiding
other health impacts is also included in these estimates.
These values do not include a number of unquantified benefits, such
as reduction in the welfare and environmental impacts of
PM2.5 pollution, or reductions in health and welfare impacts
related to other criteria air pollutants (ozone, NO2, and
SO2) and air toxics. EPA estimates different per-ton values
for reducing emissions of PM and other criteria pollutants from vehicle
use than for reductions in emissions of those same pollutants during
fuel production and distribution.\681\ NHTSA applies these separate
values to its estimates of changes in emissions from vehicle use and
from fuel production and distribution to determine the net change in
total economic damages from emissions of these pollutants.
---------------------------------------------------------------------------
\681\ These reflect differences in the typical geographic
distributions of emissions of each pollutant, their contributions to
ambient PM2.5 concentrations, pollution levels
(predominantly those of PM2.5), and resulting changes in
population exposure.
---------------------------------------------------------------------------
EPA projects that the per-ton values for reducing emissions of
criteria pollutants from both mobile sources (including motor vehicles)
and stationary sources such as fuel refineries and storage facilities
will increase over time. These projected increases reflect rising
income levels, which are assumed to increase affected individuals'
willingness to pay for reduced exposure to health threats from air
pollution, as well as future population growth, which increases
population exposure to future levels of air pollution.
ii. Reductions in CO2 Emissions
Emissions of carbon dioxide and other greenhouse gases (GHGs) occur
throughout the process of producing and distributing transportation
fuels, as well as from fuel combustion itself. Emissions of GHGs also
occur in generating electricity, which NHTSA's analysis anticipates
will account for an increasing share of energy consumption by cars and
light trucks produced in the model years that would be subject to their
proposed rules. By reducing the volume of fuel consumed by passenger
cars and light trucks, higher CAFE standards will reduce GHG emissions
generated by fuel use, as well as throughout the fuel supply system.
Lowering these emissions is likely to slow the projected pace and
reduce the ultimate extent of future changes in the global climate,
thus reducing future economic damages that changes in the global
climate are expected to cause. By reducing the probability that climate
changes with potentially catastrophic economic or environmental impacts
will occur, lowering GHG emissions may also result in economic benefits
that exceed the resulting reduction in the expected future economic
costs caused
[[Page 75215]]
by more gradual changes in the earth's climatic systems.
Quantifying and monetizing benefits from reducing GHG emissions is
thus an important step in estimating the total economic benefits likely
to result from establishing higher CAFE standards. Because carbon
dioxide emissions account for nearly 95 percent of total GHG emissions
that result from fuel combustion during vehicle use, NHTSA's analysis
of the effect of higher CAFE standards on GHG emissions focuses mainly
on estimating changes in emissions of CO2. The agency
estimates emissions of CO2 from passenger car and light
truck use by multiplying the number of gallons of each type of fuel
(gasoline and diesel) they are projected to consume under alternative
CAFE standards by the quantity or mass of CO2 emissions
released per gallon of fuel consumed. This calculation assumes that the
entire carbon content of each fuel is converted to CO2
emissions during the combustion process.
NHTSA estimates emissions of CO2 that occur during fuel
production and distribution using emission rates for each stage of this
process (feedstock production and transportation, fuel refining and
fuel storage and distribution) derived from Argonne National
Laboratories' Greenhouse Gases and Regulated Emissions in
Transportation (GREET) model. For liquid fuels, NHTSA converts these
rates to a per-gallon basis using the energy content of each fuel, and
multiplies them by the number of gallons of each type of fuel produced
and consumed under alternative standards to estimate total
CO2 emissions from fuel production and distribution. GREET
supplies emission rates for electricity generation that are expressed
as grams of CO2 per unit of energy, so these rates are
simply multiplied by the estimates of electrical energy used to charge
the on-board storage batteries of plug-in hybrid and battery electric
vehicles. As with all other effects of alternative CAFE standards, the
reduction in CO2 emissions resulting from each alternative
increase in standards is measured by the difference in total emissions
from producing and consuming fuel energy used by MY 2017-25 cars and
light trucks with those higher CAFE standards in effect, and total
CO2 emissions from supplying and using fuel energy consumed
under the baseline alternative. Unlike criteria pollutants, the
agency's estimates of CO2 emissions include those occurring
in domestic fuel production and consumption, as well as in overseas
production of petroleum and refined fuel for export to the U.S.
Overseas emissions are included because GHG emissions throughout the
world contribute equally to the potential for changes in the global
climate.
iii. Economic Value of Reductions in CO2 Emissions
NHTSA takes the economic benefits from reducing CO2
emissions into account in developing and analyzing the alternative CAFE
standards it has considered for MY 2017-25. Because research on the
impacts of climate change does not produce direct estimates of the
economic benefits from reducing CO2 or other GHG emissions,
these benefits are assumed to be the ``mirror image'' of the estimated
incremental costs resulting from increases in emissions. Thus the
benefits from reducing CO2 emissions are usually measured by
the savings in estimated economic damages that an equivalent increase
in emissions would otherwise have caused. The agency does not include
estimates of the economic benefits from reducing GHGs other than
CO2 in its analysis of alternative CAFE standards.
NHTSA estimates the value of the reductions in emissions of
CO2 resulting from adopting alternative CAFE standards using
a measure referred to as the ``social cost of carbon,'' abbreviated
SCC. The SCC is intended to provide a monetary measure of the
additional economic impacts likely to result from changes in the global
climate that would result from an incremental increase in
CO2 emissions. These potential effects include changes in
agricultural productivity, the economic damages caused by adverse
effects on human health, property losses and damages resulting from
rising sea levels, and the value of ecosystem services. The SCC is
expressed in constant dollars per additional metric ton of
CO2 emissions occurring during a specific year, and is
higher for more distant future years because the damages caused by an
additional ton of emissions increase with larger concentrations of
CO2 in the earth's atmosphere.
Reductions in CO2 emissions that are projected to result
from lower fuel production and consumption during each year over the
lifetimes of MY 2017-25 cars and light trucks are multiplied by the
estimated SCC appropriate for that year to determine the economic
benefit from reducing emissions during that year. The net present value
of these annual benefits is calculated using a discount rate that is
consistent with that used to develop the estimate of each SCC estimate.
This calculation is repeated for the reductions in CO2
emissions projected to result from each alternative increase in CAFE
standards.
NHTSA evaluates the economic benefits from reducing CO2
emissions using estimates of the SCC developed by an interagency
working group convened for the specific purpose of developing new
estimates for use by U.S. Federal agencies in regulatory evaluations.
The group's purpose in developing new estimates of the SCC was to allow
Federal agencies to incorporate the social benefits of reducing
CO2 emissions into cost-benefit analyses of regulatory
actions that have relatively modest impacts on cumulative global
emissions, as most Federal regulatory actions can be expected to have.
NHTSA previously relied on the SCC estimates developed by this
interagency group to analyze the alternative CAFE standards it
considered for MY 2012-16 cars and light trucks, as well as the fuel
efficiency standards it adopted for MY 014-18 heavy-duty vehicles.
The interagency group convened on a regular basis over the period
from June 2009 through February 2010, to explore technical literature
in relevant fields and develop key inputs and assumptions necessary to
generate estimates of the SCC. Agencies participating in the
interagency process included the Environmental Protection Agency and
the Departments of Agriculture, Commerce, Energy, Transportation, and
Treasury. This process was convened by the Council of Economic Advisers
and the Office of Management and Budget, with active participation and
regular input from the Council on Environmental Quality, National
Economic Council, Office of Energy and Climate Change, and Office of
Science and Technology Policy.
The interagency group's main objective was to develop a range of
SCC values using clearly articulated input assumptions grounded in the
existing scientific and economic literatures, in conjunction with a
range of models that employ different representations of climate change
and its economic impacts. The group clearly acknowledged the many
uncertainties that its process identified, and recommended that its
estimates of the SCC should be updated periodically to incorporate
developing knowledge of the science and economics of climate impacts.
Specifically, it set a preliminary goal to revisit the SCC values
within two years, or as substantial improvements in understanding of
the science and economics of climate impacts and updated models for
estimating and
[[Page 75216]]
valuing these impacts become available. The group ultimately selected
four SCC values for use in federal regulatory analyses. Three values
were based on the average of SCC estimates developed using three
different climate economic models (referred to as integrated assessment
models), using discount rates of 2.5, 3, and 5 percent. The fourth
value, which represents the 95th percentile SCC estimate from the
combined distribution of values generated by the three models at a 3
percent discount rate, represents the possibility of possibility of
higher-than-expected impacts from the accumulation of GHGs in the
earth's atmosphere, and the consequently larger economic damages.
Table IV-10 summarizes the interagency group's estimates of the SCC
during various future years, which the agency has updated to 2009
dollars to correspond to the other values it uses to estimate economic
benefits from the alternative CAFE standards considered in this
NPRM.\682\
---------------------------------------------------------------------------
\682\ The SCC estimates reported in the table assume that the
damages resulting from increased emissions are constant for small
departures from the baseline emissions forecast incorporated in each
estimate, an approximation that is reasonable for policies with
projected effects on CO2 emissions that are small
relative to cumulative global emissions.
[GRAPHIC] [TIFF OMITTED] TP01DE11.178
[[Page 75217]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.179
As Table IV-10 shows, the four SCC estimates selected by the
interagency group for use in regulatory analyses are $5, $23, $38, and
$70 per metric ton (in 2009 dollars) for emissions occurring in the
year 2012. The value that the interagency group centered its attention
on is the average SCC estimate developed using different models and a 3
percent discount rate, or $23 per metric ton in 2012. To capture the
uncertainties involved in regulatory impact analysis, however, the
group emphasized the importance of considering the full range of
estimated SCC values. As the table also shows, the SCC estimates also
rise over time; for example, the average SCC at the 3 percent discount
rate increases to $27 per metric ton of CO2 by 2020 and
reaches $46 per metric ton of CO2 in 2050.
Details of the process used by the interagency group to develop its
SCC estimates, complete results including year-by-year estimates of
each of the four values, and a thorough discussion of their intended
use and limitations is provided in the document Social Cost of Carbon
for Regulatory Impact Analysis Under Executive Order 12866, Interagency
Working Group on Social Cost of Carbon, United States Government,
February 2010.\683\
---------------------------------------------------------------------------
\683\ This document is available in the docket for the 2012-2016
rulemaking (NHTSA-2009-0059).
---------------------------------------------------------------------------
m. Discounting Future Benefits and Costs
Discounting future fuel savings and other benefits accounts for the
reduction in their value when they are deferred until some future date,
rather than received immediately. The value of benefits that are not
expected to occur until the future is lower partly because people value
current consumption more highly than equivalent consumption at some
future date--stated simply, they are impatient--and partly because they
expect their living standards to be higher in the future, so additional
consumption will improve their well-being by more today than it will in
the future. The discount rate expresses the percent decline in the
value of these benefits--as viewed from today's perspective--for each
year they are deferred into the future. In evaluating the benefits from
alternative increases in CAFE standards for MY 2017-2025 passenger cars
and light trucks, NHTSA primarily employs a discount rate of 3 percent
per year, but in accordance with OMB guidance, also presents these
benefit and cost estimates using a 7 percent discount rate.
While it presents results that reflect both discount rates, NHTSA
believes that the 3 percent rate is more appropriate for discounting
future benefits from increased CAFE standards, because the agency
expects that most or all of vehicle manufacturers' costs for complying
with higher CAFE standards will ultimately be reflected in higher
selling prices for their new vehicle models. By increasing sales prices
for new cars and light trucks, CAFE regulations will thus primarily
affect vehicle purchases and other private consumption decisions. Both
economic theory and OMB guidance on discounting indicate that the
future benefits and costs of regulations that mainly affect private
consumption
[[Page 75218]]
should be discounted at consumers' rate of time preference.\684\
---------------------------------------------------------------------------
\684\ Id.
---------------------------------------------------------------------------
Current OMB guidance also indicates that savers appear to discount
future consumption at an average real (that is, adjusted to remove the
effect of inflation) rate of about 3 percent when they face little risk
about the future. Since the real interest rate that savers require to
persuade them to defer consumption into the future represents a
reasonable estimate of consumers' rate of time preference, NHTSA
believes that the 3 percent rate is appropriate for discounting
projected future benefits and costs resulting from higher CAFE
standards.
Because there is some uncertainty about whether vehicle
manufacturers will completely recover their costs for complying with
higher CAFE standards by increasing vehicle sales prices, however,
NHTSA also presents benefit and cost estimates discounted using a
higher rate. To the extent that manufacturers are unable to recover
their costs for meeting higher CAFE standards by increasing new vehicle
prices, these costs are likely to displace other investment
opportunities available to them. OMB guidance indicates that the real
economy-wide opportunity cost of capital is the appropriate discount
rate to apply to future benefits and costs when the primary effect of a
regulation is ``* * * to displace or alter the use of capital in the
private sector,'' and OMB estimates that this rate currently averages
about 7 percent.\685\ Thus the agency's analysis of alternative
increases in CAFE standards for MY 2017-25 cars and light trucks also
reports benefits and costs discounted at a 7 percent rate.
---------------------------------------------------------------------------
\685\ Office of Management and Budget, Circular A-4,
``Regulatory Analysis,'' September 17, 2003, 33. Available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf (last accessed Sept.
26, 2011).
---------------------------------------------------------------------------
One important exception to the agency's use of 3 percent and 7
percent discount rates is arises in discounting benefits from reducing
CO2 emissions over the lifetimes of MY 2017-2025 cars and
light trucks to their present values. In order to ensure consistency in
the derivation and use of the interagency group's estimates of the unit
values of reducing CO2 emissions (or SCC), the benefits from
reducing CO2 emissions during each future year are
discounted using the same ``intergenerational'' discount rates that
were used to derive each of the alternative values. As indicated in
Table IV-10 above, these rates are 2.5 percent, 3 percent, and 5
percent depending on which estimate of the SCC is being employed.\686\
---------------------------------------------------------------------------
\686\ The fact that the 3 percent discount rate used by the
interagency group to derive its central estimate of the SCC is
identical to the 3 percent short-term or ``intra-generational''
discount rate used by NHTSA to discount future benefits other than
reductions in CO2 emissions is coincidental, and should
not be interpreted as a required condition that must be satisfied in
future rulemakings.
---------------------------------------------------------------------------
n. Accounting for Uncertainty in Benefits and Costs
In analyzing the uncertainty surrounding its estimates of benefits
and costs from alternative CAFE standards, NHTSA considers alternative
estimates of those assumptions and parameters likely to have the
largest effect. These include the projected costs of fuel economy-
improving technologies and their anticipated effectiveness in reducing
fuel consumption, forecasts of future fuel prices, the magnitude of the
rebound effect, the reduction in external economic costs resulting from
lower U.S. oil imports, and the discount rate applied to future
benefits and costs. The range for each of these variables employed in
the uncertainty analysis was previously identified in the sections of
this notice discussing each variable.
The uncertainty analysis was conducted by assuming either
independent normal or beta probability distributions for each of these
variables, using the low and high estimates for each variable as the
values between which 90 percent of observed values are expected to
fall. Each trial of the uncertainty analysis employed a set of values
randomly drawn from these probability distributions, under the
assumption that the value of each variable is independent from those of
the others. In cases where the data on the possible distribution of
parameters was relatively sparse, making a choice of distributions
difficult, a beta distribution is commonly employed to give more weight
to both tails than would be the case had a normal distribution been
employed. Benefits and costs of each alternative standard were
estimated using each combination of variables, and a total of nearly
40,000 trials were used to estimate the likely range of estimated
benefits and costs for each alternative standard.
o. Where can readers find more information about the economic
assumptions?
Much more detailed information is provided in Chapter VIII of the
PRIA, and a discussion of how NHTSA and EPA jointly reviewed and
updated economic assumptions for purposes of this proposal is available
in Chapter 4 of the draft Joint TSD. In addition, all of NHTSA's model
input and output files are now public and available for the reader's
review and consideration. The economic input files can be found in the
docket for this proposed rule, NHTSA-2010-0131, and on NHTSA's Web
site.\687\
---------------------------------------------------------------------------
\687\ See http://www.nhtsa.gov/fuel-economy.
---------------------------------------------------------------------------
Finally, because much of NHTSA's economic analysis for purposes of
this proposal builds on the work that was done for the final rule
establishing CAFE standards for MYs 2012-16, we refer readers to that
document as well. It contains valuable background information
concerning how NHTSA's assumptions regarding economic inputs for CAFE
analysis have evolved over the past several rulemakings, both in
response to comments and as a result of the agency's growing experience
with this type of analysis.\688\
---------------------------------------------------------------------------
\688\ 74 FR 14308-14358 (Mar. 30, 2009).
---------------------------------------------------------------------------
4. How does NHTSA use the assumptions in its modeling analysis?
In developing today's proposed CAFE standards, NHTSA has made
significant use of results produced by the CAFE Compliance and Effects
Model (commonly referred to as ``the CAFE Model'' or ``the Volpe
model''), which DOT's Volpe National Transportation Systems Center
developed specifically to support NHTSA's CAFE rulemakings. The model,
which has been constructed specifically for the purpose of analyzing
potential CAFE standards, integrates the following core capabilities:
(1) Estimating how manufacturers could apply technologies in
response to new fuel economy standards,
(2) Estimating the costs that would be incurred in applying these
technologies,
(3) Estimating the physical effects resulting from the application
of these technologies, such as changes in travel demand, fuel
consumption, and emissions of carbon dioxide and criteria pollutants,
and
(4) Estimating the monetized societal benefits of these physical
effects.
An overview of the model follows below. Separate model
documentation provides a detailed explanation of the functions the
model performs, the calculations it performs in doing so, and how to
install the model, construct inputs to the model, and interpret the
model's outputs. Documentation of the model, along with model
installation files, source code, and sample inputs are available at
NHTSA's Web site. The model documentation is also available in the
docket for today's proposed rule, as are inputs for and outputs from
[[Page 75219]]
analysis of today's proposed CAFE standards.
a. How does the model operate?
As discussed above, the agency uses the CAFE model to estimate how
manufacturers could attempt to comply with a given CAFE standard by
adding technology to fleets that the agency anticipates they will
produce in future model years. This exercise constitutes a simulation
of manufacturers' decisions regarding compliance with CAFE standards.
This compliance simulation begins with the following inputs: (a)
The baseline and reference market forecast discussed above in Section
IV.C.1 and Chapter 1 of the TSD, (b) technology-related estimates
discussed above in Section IV.C.2 and Chapter 3 of the TSD, (c)
economic inputs discussed above in Section IV.C.3 and Chapter 4 of the
TSD, and (d) inputs defining baseline and potential new CAFE standards.
For each manufacturer, the model applies technologies in a sequence
that follows a defined engineering logic (``decision trees'' discussed
in the MY 2011 final rule and in the model documentation) and a cost-
minimizing strategy in order to identify a set of technologies the
manufacturer could apply in response to new CAFE standards.\689\ The
model applies technologies to each of the projected individual vehicles
in a manufacturer's fleet, considering the combined effect of
regulatory and market incentives. Depending on how the model is
exercised, it will apply technology until one of the following occurs:
---------------------------------------------------------------------------
\689\ NHTSA does its best to remain scrupulously neutral in the
application of technologies through the modeling analysis, to avoid
picking technology ``winners.'' The technology application
methodology has been reviewed by the agency over the course of
several rulemakings, and commenters have been generally supportive
of the agency's approach. See, e.g., 74 FR 14238-14246 (Mar. 30,
2009).
---------------------------------------------------------------------------
(1) The manufacturer's fleet achieves compliance \690\ with the
applicable standard, and continuing to add technology in the current
model year would be attractive neither in terms of stand-alone (i.e.,
absent regulatory need) cost effectiveness nor in terms of facilitating
compliance in future model years; \691\
---------------------------------------------------------------------------
\690\ The model has been modified to provide the ability--as an
option--to account for credit mechanisms (i.e., carry-forward,
carry-back, transfers, and trades) when determining whether
compliance has been achieved. For purposes of determining maximum
feasible CAFE standards, NHTSA cannot consider these mechanisms, and
exercises the CAFE model without enabling these options.
\691\ In preparation for the MY 2012-2016 rulemaking, the model
was modified in order to apply additional technology in early model
years if doing so will facilitate compliance in later model years.
This is designed to simulate a manufacturer's decision to plan for
CAFE obligations several years in advance, which NHTSA believes
better replicates manufacturers' actual behavior as compared to the
year-by-year evaluation which EPCA would otherwise require.
---------------------------------------------------------------------------
(2) The manufacturer ``exhausts'' \692\ available technologies; or
---------------------------------------------------------------------------
\692\ In a given model year, the model makes additional
technologies available to each vehicle model within several
constraints, including (a) Whether or not the technology is
applicable to the vehicle model's technology class, (b) whether the
vehicle is undergoing a redesign or freshening in the given model
year, (c) whether engineering aspects of the vehicle make the
technology unavailable (e.g., secondary axle disconnect cannot be
applied to two-wheel drive vehicles), and (d) whether technology
application remains within ``phase in caps'' constraining the
overall share of a manufacturer's fleet to which the technology can
be added in a given model year. Once enough technology is added to a
given manufacturer's fleet in a given model year that these
constraints make further technology application unavailable,
technologies are ``exhausted'' for that manufacturer in that model
year.
---------------------------------------------------------------------------
(3) For manufacturers estimated to be willing to pay civil
penalties, the manufacturer reaches the point at which doing so would
be more cost-effective (from the manufacturer's perspective) than
adding further technology.\693\
---------------------------------------------------------------------------
\693\ This possibility was added to the model to account for the
fact that under EPCA/EISA, manufacturers must pay fines if they do
not achieve compliance with applicable CAFE standards. 49 U.S.C.
32912(b). NHTSA recognizes that some manufacturers will find it more
cost-effective to pay fines than to achieve compliance, and believes
that to assume these manufacturers would exhaust available
technologies before paying fines would cause unrealistically high
estimates of market penetration of expensive technologies such as
diesel engines and strong hybrid electric vehicles, as well as
correspondingly inflated estimates of both the costs and benefits of
any potential CAFE standards. NHTSA thus includes the possibility of
manufacturers choosing to pay fines in its modeling analysis in
order to achieve what the agency believes is a more realistic
simulation of manufacturer decision-making. Unlike flex-fuel and
other credits, NHTSA is not barred by statute from considering fine-
payment in determining maximum feasible standards under EPCA/EISA.
49 U.S.C. 32902(h).
---------------------------------------------------------------------------
As discussed below, the model has also been modified in order to--
as an option--apply more technology than may be necessary to achieve
compliance in a given model year, or to facilitate compliance in later
model years. This ability to simulate ``voluntary overcompliance''
reflects the potential that manufacturers will apply some technologies
to some vehicles if doing so would be sufficiently inexpensive compared
to the expected reduction in owners' outlays for fuel.
The model accounts explicitly for each model year, applying most
technologies when vehicles are scheduled to be redesigned or freshened,
and carrying forward technologies between model years. The CAFE model
accounts explicitly for each model year because EPCA requires that
NHTSA make a year-by-year determination of the appropriate level of
stringency and then set the standard at that level, while ensuring
ratable increases in average fuel economy.\694\ The multiyear planning
capability and (optional) simulation of ``voluntary overcompliance''
and EPCA credit mechanisms increase the model's ability to simulate
manufacturers' real-world behavior, accounting for the fact that
manufacturers will seek out compliance paths for several model years at
a time, while accommodating the year-by-year requirement.
---------------------------------------------------------------------------
\694\ 49 U.S.C. 32902(a) states that at least 18 months before
the beginning of each model year, the Secretary of Transportation
shall prescribe by regulation average fuel economy standards for
automobiles manufactured by a manufacturer in that model year, and
that each standard shall be the maximum feasible average fuel
economy level that the Secretary decides the manufacturers can
achieve in that year. NHTSA has long interpreted this statutory
language to require year-by-year assessment of manufacturer
capabilities. 49 U.S.C. 32902(b)(2)(C) also requires that standards
increase ratably between MY 2011 and MY 2020.
---------------------------------------------------------------------------
The model also calculates the costs, effects, and benefits of
technologies that it estimates could be added in response to a given
CAFE standard.\695\ It calculates costs by applying the cost estimation
techniques discussed above in Section IV.C.2, and by accounting for the
number of affected vehicles. It accounts for effects such as changes in
vehicle travel, changes in fuel consumption, and changes in greenhouse
gas and criteria pollutant emissions. It does so by applying the fuel
consumption estimation techniques also discussed in Section IV.C.2, and
the vehicle survival and mileage accumulation forecasts, the rebound
effect estimate and the fuel properties and emission factors discussed
in Section IV.C.3. Considering changes in travel demand and fuel
consumption, the model estimates the monetized value of accompanying
benefits to society, as discussed in Section IV.C.3. The model
calculates both the undiscounted and discounted value of benefits that
accrue over time in the future.
---------------------------------------------------------------------------
\695\ As for all of its other rulemakings, NHTSA is required by
Executive Order 12866 (as amended by Executive Order 13563) and DOT
regulations to analyze the costs and benefits of CAFE standards.
Executive Order 12866, 58 FR 51735 (Oct. 4, 1993); DOT Order 2100.5,
``Regulatory Policies and Procedures,'' 1979, available at http://regs.dot.gov/rulemakingrequirements.htm (last accessed February 21,
2010).
---------------------------------------------------------------------------
The CAFE model has other capabilities that facilitate the
development of a CAFE standard. The integration of (a) Compliance
simulation and (b) the calculation of costs, effects,
[[Page 75220]]
and benefits facilitates analysis of sensitivity of results to model
inputs. The model can also be used to evaluate many (e.g., 200 per
model year) potential levels of stringency sequentially, and identify
the stringency at which specific criteria are met. For example, it can
identify the stringency at which net benefits to society are maximized,
the stringency at which a specified total cost is reached, or the
stringency at which a given average required fuel economy level is
attained. This allows the agency to compare more easily the impacts in
terms of fuel savings, emissions reductions, and costs and benefits of
achieving different levels of stringency according to different
criteria. The model can also be used to perform uncertainty analysis
(i.e., Monte Carlo simulation), in which input estimates are varied
randomly according to specified probability distributions, such that
the uncertainty of key measures (e.g., fuel consumption, costs,
benefits) can be evaluated.
b. Has NHTSA considered other models?
As discussed in the most recent CAFE rulemaking, while nothing in
EPCA requires NHTSA to use the CAFE model, and in principle, NHTSA
could perform all of these tasks through other means, the model's
capabilities have greatly increased the agency's ability to rapidly,
systematically, and reproducibly conduct key analyses relevant to the
formulation and evaluation of new CAFE standards.\696\
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\696\ 75 FR 25598-25599.
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NHTSA notes that the CAFE model not only has been formally peer-
reviewed and tested and reviewed through three rulemakings, but also
has some features especially important for the analysis of CAFE
standards under EPCA/EISA. Among these are the ability to perform year-
by-year analysis, and the ability to account for engineering
differences between specific vehicle models.
EPCA requires that NHTSA set CAFE standards for each model year at
the level that would be ``maximum feasible'' for that year. Doing so
requires the ability to analyze each model year and, when developing
regulations covering multiple model years, to account for the
interdependency of model years in terms of the appropriate levels of
stringency for each one. Also, as part of the evaluation of the
economic practicability of the standards, as required by EPCA, NHTSA
has traditionally assessed the annual costs and benefits of the
standards. In response to comments regarding an early version of the
CAFE model, DOT modified the CAFE model in order to account for
dependencies between model years and to better represent manufacturers'
planning cycles, in a way that still allowed NHTSA to comply with the
statutory requirement to determine the appropriate level of the
standards for each model year.
The CAFE model is also able to account for important engineering
differences between specific vehicle models, and to thereby reduce the
risk of applying technologies that may be incompatible with or already
present on a given vehicle model. By combining technologies
incrementally and on a model-by-model basis, the CAFE model is able to
account for important engineering differences between vehicle models
and avoid unlikely technology combinations
The CAFE model also produces a single vehicle-level output file
that, for each vehicle model, shows which technologies were present at
the outset of modeling, which technologies were superseded by other
technologies, and which technologies were ultimately present at the
conclusion of modeling. For each vehicle, the same file shows resultant
changes in vehicle weight, fuel economy, and cost. This provides for
efficient identification, analysis, and correction of errors, a task
with which the public can now assist the agency, since all inputs and
outputs are public.
Such considerations, as well as those related to the efficiency
with which the CAFE model is able to analyze attribute-based CAFE
standards and changes in vehicle classification, and to perform higher-
level analysis such as stringency estimation (to meet predetermined
criteria), sensitivity analysis, and uncertainty analysis, lead the
agency to conclude that the model remains the best available to the
agency for the purposes of analyzing potential new CAFE standards.
c. What changes has DOT made to the model?
Between promulgation of the MY 2012-2016 CAFE standards and today's
proposal regarding MY 2017-2025 standards, the CAFE model has been
revised to make some minor improvements, and to add some significant
new capabilities: (1) Accounting for electricity used to charge
electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs),
(2) accounting for use of ethanol blends in flexible-fuel vehicles
(FFVs), (3) accounting for costs (i.e., ``stranded capital'') related
to early replacement of technologies, (4) accounting for previously-
applied technology when determining the extent to which a manufacturer
could expand use of the technology, (5) applying technology-specific
estimates of changes in consumer value, (6) simulating the extent to
which manufacturers might utilize EPCA's provisions regarding
generation and use of CAFE credits, (7) applying estimates of fuel
economy adjustments (and accompanying costs) reflecting increases in
air conditioner efficiency, (8) reporting privately-valued benefits,
(9) simulating the extent to which manufacturers might voluntarily
apply technology beyond levels needed for compliance with CAFE
standards, and (10) estimating changes in highway fatalities
attributable to any applied reductions in vehicle mass. These
capabilities are described below, and in greater detail in the CAFE
model documentation.\697\
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\697\ Model documentation is available on NHTSA's Web site.
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To support evaluation of the effects electric vehicles (EVs) and
plug-in hybrid vehicles (PHEVs) could have on energy consumption and
associated costs and environmental effects, DOT has expanded the CAFE
model to estimate the amount of electricity that would be required to
charge these vehicles (accounting for the potential that PHEVs can also
run on gasoline). The model calculates the cost of this electricity, as
well as the accompanying upstream criteria pollutant and greenhouse gas
emissions.
Similar to this expansion to account for the potential the PHEVs
can be refueled with gasoline or recharged with electricity, DOT has
expanded the CAFE model to account for the potential that other
flexible-fuel vehicles can be operated on multiple fuels. In
particular, the model can account for ethanol FFVs consuming E85 or
gasoline, and to report consumption of both fuels, as well as
corresponding costs and upstream emissions.
Among the concerns raised in the past regarding how technology
costs are estimated has been one that stranded capital costs be
considered. Capital becomes ``stranded'' when capital equipment is
retired or its use is discontinued before the equipment has been fully
depreciated and the equipment still retains some value or usefulness.
DOT has modified the CAFE model to, if specified for a given
technology, when that technology is replaced by a newly applied
technology, apply a stream of costs representing the stranded capital
cost of the replaced technology. This cost is in addition to the cost
for producing the newly
[[Page 75221]]
applied technology in the first year of production.
As documented in prior CAFE rulemakings, the CAFE model applies
``phase-in caps'' to constrain technology application at the vehicle
manufacturer level. They are intended to reflect a manufacturer's
overall resource capacity available for implementing new technologies
(such as engineering and development personnel and financial
resources), thereby ensuring that resource capacity is accounted for in
the modeling process. This helps to ensure technological feasibility
and economic practicability in determining the stringency of the
standards. When the MY 2012-2016 rulemaking analysis was completed, the
model performed the relevant test by comparing a given phase-in cap to
the amount (i.e., the share of the manufacturer's fleet) to which the
technology had been added by the model. DOT has since modified the CAFE
model to take into account the extent to which a given manufacturer has
already applied the technology (i.e., as reflected in the market
forecast specified as a model inputs), and to apply the relevant test
based on the total application of the technology.
The CAFE model requires inputs defining the technology-specific
cost and efficacy (i.e., percentage reduction of fuel consumption), and
has, to date, effectively assumed that these input values reflect
application of the technology in a manner that holds vehicle
performance and utility constant. Considering that some technologies
may, nonetheless, offer owners greater or lesser value (beyond that
related to fuel outlays, which the model calculates internally based on
vehicle fuel type and fuel economy), DOT has modified the CAFE model to
accept and apply technology-specific estimates of any value gain
realized or loss incurred by vehicle purchasers.\698\
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\698\ For example, a value gain could be specified for a
technology expected to improve ride quality, and a value loss could
be specified for a technology expected to reduce vehicle range.
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For the MY 2012-2016 CAFE rulemaking analysis, DOT modified the
CAFE model to accommodate specification and accounting for credits a
manufacturer is assumed to earn by producing flexible fuel vehicles
(FFVs). Although NHTSA cannot consider such credits when determining
maximum feasible CAFE standards, the agency presented an analysis that
included FFV credits, in order to communicate the extent to which use
of such credits might cause actual costs, effects, and benefits to be
lower than estimated in NHTSA's formal analysis. As DOT explained at
the time, it was unable to account for other EPCA credit mechanisms,
because attempts to do so had been limited by complex interactions
between those mechanisms and the multiyear planning aspects of the CAFE
model. DOT has since modified the CAFE model to provide the ability to
account for any or all of the following flexibilities provided by EPCA:
FFV credits, credit carry-forward and carry-back (between model years),
credit transfers (between passenger car and light truck fleets), and
credit trades (between manufacturers). The model accounts for EPCA-
specified limitations applicable to these flexibilities (e.g., limits
on the amount of credit that can be transferred between passenger car
and light truck fleets). These capabilities in the model provide a
basis for more accurately estimating costs, effects, and benefits that
may actually result from new CAFE standards. Insofar as some
manufacturers actually do earn and use CAFE credits, this provides
NHTSA with the ability to examine outcomes more realistically than EPCA
allows for purposes of setting new CAFE standards.
NHTSA is today proposing CAFE standards reflecting EPA's proposal
to change fuel economy calculation procedures such that a vehicle's
fuel consumption improvement will be accounted for if the vehicle has
technologies that reduce the amount of energy needed to power the air
conditioner. To facilitate analysis of these standards, DOT has
modified the CAFE model to account for these adjustments, based on
inputs specifying the average amount of improvement anticipated, and
the estimated average cost to apply the underlying technology.
Considering that past CAFE rulemakings indicate that most of the
benefits of CAFE standards are realized by vehicle owners, DOT has
modified the CAFE model to estimate not just social benefits, but also
private benefits. The model accommodates separate discount rates for
these two valuation methods (e.g., a 3% rate for social benefits with a
7% rate for private benefits). When calculating private benefits, the
model includes changes in outlays for fuel taxes (which, as economic
transfers, are excluded from social benefits) and excludes changes in
economic externalities (e.g., monetized criteria pollutant and
greenhouse gas emissions).
Since 2003, the CAFE model (and its predecessors) have provided the
ability to estimate the extent to which a manufacturer with a history
of paying civil penalties allowed under EPCA might decide to add some
fuel-saving technology, but not enough to comply with CAFE standards.
In simulating this decision-making, the model considers the cost to add
the technology, the calculated reduction in civil penalties, and the
calculated present value (at the time of vehicle purchase) of the
change in fuel outlays over a specified ``payback period'' (e.g., 5
years). For a manufacturer assumed to be willing to pay civil
penalties, the model stops adding technology once paying fines becomes
more attractive than continuing to add technology, considering these
three factors. As an extension of this simulation approach, DOT has
modified the CAFE model to, if specified, simulate the potential that a
manufacturer would add more technology than required for purposes of
compliance with CAFE standards. When set to operate in this manner, the
model will continue to apply technology to a manufacturer's CAFE-
compliant fleet until applying further technology will incur more in
cost than it will yield in calculated fuel savings over a specified
``payback period'' that is set separately from the payback period
applicable until compliance is achieved. In its analysis supporting MY
2012-2016 standards adopted in 2010, NHTSA estimated the extent to
which reductions in vehicle mass might lead to changes in the number of
highway fatalities occurring over the useful life of the MY 2012-2016
fleet. NHTSA performed these calculations outside the CAFE model (using
vehicle-specific mass reduction calculations from the model), based on
agency analysis of relevant highway safety data. DOT has since modified
the CAFE model to perform these calculations, using an analytical
structure indicated by an update to the underlying safety analysis. The
model also applies an input value indicating the economic value of a
statistical life, and includes resultant benefits (or disbenefits) in
the calculation of total social benefits.
In comments on recent NHTSA rulemakings, some reviewers have
suggested that the CAFE model should be modified to estimate the extent
to which new CAFE standards would induce changes in the mix of vehicles
in the new vehicle fleet. NHTSA agrees that a ``market shift'' model,
also called a consumer vehicle choice model, could provide useful
information regarding the possible effects of potential new CAFE
standards. NHTSA has contracted with the Brookings Institution (which
has subcontracted with researchers at U.C. Davis, U.C. Irvine) to
develop a vehicle choice model estimated at the vehicle configuration
level that can be
[[Page 75222]]
implemented as part of DOT's CAFE model. As discussed further in
Section V of the PRIA, past efforts by DOT staff demonstrated that a
vehicle could be added to the CAFE model, but did not yield credible
coefficients specifying such a model. If a suitable and credibly
calibrated vehicle choice model becomes available in time--whether
through the Brookings-led research or from other sources, DOT may
integrate a vehicle choice model into the CAFE model for the final
rule.
NHTSA anticipates this integration of a vehicle choice model would
be structurally and operationally similar to the integration we
implemented previously. As under the version applied in support of
today's announcement, the CAFE model would begin with an agency-
estimated market forecast, estimate to what extent manufacturers might
apply additional fuel-saving technology to each vehicle model in
consideration of future fuel prices and baseline or alternative CAFE
standards and fuel prices, and calculate resultant changes in the fuel
economy (and possibly fuel type) and price of individual vehicle
models. With an integrated market share model, the CAFE model would
then estimate how the sales volumes of individual vehicle models would
change in response to changes in fuel economy levels and prices
throughout the light vehicle market, possibly taking into account
interactions with the used vehicle market. Having done so, the model
would replace the sales estimates in the original market forecast with
those reflecting these model-estimated shifts, repeating the entire
modeling cycle until converging on a stable solution.
Based on past experience, we anticipate that this recursive
simulation will be necessary to ensure consistency between sales
volumes and modeled fuel economy standards, because achieved CAFE
levels depend on sales mix and, under attribute-based CAFE standards,
required CAFE levels also depend on sales mix. NHTSA anticipates,
therefore, that application of a market share model would impact
estimates of all of the following for a given schedule of CAFE
standards: overall market volume, manufacturer market shares and
product mix, required and achieved CAFE levels, technology application
rates and corresponding incurred costs, fuel consumption, greenhouse
gas and criteria pollutant emissions, changes in highway fatalities,
and economic benefits.
Past testing by DOT/NHTSA staff did not indicate major shifts in
broad measures (e.g., in total costs or total benefits), but that
testing emphasized shorter modeling periods (e.g., 1-5 model years) and
less stringent standards than reflected in today's proposal. Especially
without knowing the characteristics of a future vehicle choice model,
it is difficult to anticipate the potential degree to which its
inclusion would impact analytical outcomes.
NHTSA invites comment on the above changes to the CAFE model. The
agency's consideration of any alternative approaches will be
facilitated by specific recommendations regarding implementation within
the model's overall structure. NHTSA also invites comment regarding
above-mentioned prospects for inclusion of a vehicle choice model. The
agency's consideration will be facilitated by specific information
demonstrating that inclusion of such a model would lead to more
realistic estimates of costs, effects, and benefits, or that inclusion
of such a model would lead to less realistic estimates.
d. Does the model set the standards?
Since NHTSA began using the CAFE model in CAFE analysis, some
commenters have interpreted the agency's use of the model as the way by
which the agency chooses the maximum feasible fuel economy standards.
As the agency explained in its most recent CAFE rulemaking, this is
incorrect.\699\ Although NHTSA currently uses the CAFE model as a tool
to inform its consideration of potential CAFE standards, the CAFE model
does not determine the CAFE standards that NHTSA proposes or
promulgates as final regulations. The results it produces are
completely dependent on inputs selected by NHTSA, based on the best
available information and data available in the agency's estimation at
the time standards are set. Ultimately, NHTSA's selection of
appropriate CAFE standards is governed and guided by the statutory
requirements of EPCA, as amended by EISA: NHTSA sets the standard at
the maximum feasible average fuel economy level that it determines is
achievable during a particular model year, considering technological
feasibility, economic practicability, the effect of other standards of
the Government on fuel economy, and the need of the nation to conserve
energy.
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\699\ 75 FR 25600.
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e. How does NHTSA make the model available and transparent?
Model documentation, which is publicly available in the rulemaking
docket and on NHTSA's Web site, explains how the model is installed,
how the model inputs (all of which are available to the public) \700\
and outputs are structured, and how the model is used. The model can be
used on any Windows-based personal computer with Microsoft Office 2003
or 2007 and the Microsoft .NET framework installed (the latter
available without charge from Microsoft). The executable version of the
model and the underlying source code are also available at NHTSA's Web
site. The input files used to conduct the core analysis documented in
this proposal are available in the public docket. With the model and
these input files, anyone is capable of independently running the model
to repeat, evaluate, and/or modify the agency's analysis.
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\700\ We note, however, that files from any supplemental
analysis conducted that relied in part on confidential manufacturer
product plans cannot be made public, as prohibited under 49 CFR part
512.
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Because the model is available on NHTSA's web site, the agency has
no way of knowing how widely the model has been used. The agency is,
however, aware that the model has been used by other federal agencies,
vehicle manufacturers, private consultants, academic researchers, and
foreign governments. Some of these individuals have found the model
complex and challenging to use. Insofar as the model's sole purpose is
to help DOT staff efficiently analyze potential CAFE standards, DOT has
not expended significant resources trying to make the model as ``user
friendly'' as commercial software intended for wide use. However, DOT
wishes to facilitate informed comment on the proposed standards, and
encourages reviewers to contact the agency promptly if any difficulties
using the model are encountered.
NHTSA arranged for a formal peer review of an older version of the
model, has responded to reviewers' comments, and has considered and
responded to model-related comments received over the course of four
CAFE rulemakings. In the agency's view, this steady and expanding
outside review over the course of nearly a decade of model development
has helped DOT to significantly strengthen the model's capabilities and
technical quality, and has greatly increased transparency, such that
all model code is publicly available, and all model inputs and outputs
are publicly available in a form that should allow reviewers to
reproduce the agency's analysis. NHTSA is currently preparing
arrangements for a formal peer review of the current CAFE model.
Depending on the schedule for that
[[Page 75223]]
review, DOT will consider possible model revisions and, as feasible,
attempt to make any appropriate revisions before performing analysis
supporting final CAFE standards for MY 2017 and beyond.
D. Statutory Requirements
1. EPCA, as Amended by EISA
a. Standard Setting
EPCA, as amended by EISA, contains a number of provisions regarding
how NHTSA must set CAFE standards. NHTSA must establish separate CAFE
standards for passenger cars and light trucks \701\ for each model
year,\702\ and each standard must be the maximum feasible that NHTSA
believes the manufacturers can achieve in that model year.\703\ When
determining the maximum feasible level achievable by the manufacturers,
EPCA requires that the agency consider the four statutory factors of
technological feasibility, economic practicability, the effect of other
motor vehicle standards of the Government on fuel economy, and the need
of the United States to conserve energy.\704\ In addition, the agency
has the authority to and traditionally does consider other relevant
factors, such as the effect of the CAFE standards on motor vehicle
safety. The ultimate determination of what standards can be considered
maximum feasible involves a weighing and balancing of these factors,
and the balance may shift depending on the information before the
agency about the expected circumstances in the model years covered by
the rulemaking. Always in conducting that balancing, however, the
implication of the ``maximum feasible'' requirement is that it calls
for setting a standard that exceeds what might be the minimum
requirement if the agency determines that the manufacturers can achieve
a higher level, and that the agency's decision support the overarching
purpose of EPCA, energy conservation.\705\
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\701\ 49 U.S.C. 32902(b)(1).
\702\ 49 U.S.C. 32902(a).
\703\ Id.
\704\ 49 U.S.C. 32902(f).
\705\ Center for Biological Diversity v. NHTSA, 538 F.3d 1172,
1197 (9th Cir. 2008) (``Whatever method it uses, NHTSA cannot set
fuel economy standards that are contrary to Congress' purpose in
enacting the EPCA--energy conservation.'').
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Besides the requirement that standards be maximum feasible for the
fleet in question, EPCA/EISA also contains several other requirements.
The standards must be attribute-based and expressed in the form of a
mathematical function--NHTSA has thus far based standards on vehicle
footprint, and for this rulemaking has expressed them in the form of a
constrained linear function that generally sets higher (more stringent)
mpg targets for smaller-footprint vehicles and lower (less stringent)
mpg targets for larger-footprint vehicles. Second, the standards are
subject to a minimum requirement regarding stringency: they must be set
at levels high enough to ensure that the combined U.S. passenger car
and light truck fleet achieves an average fuel economy level of not
less than 35 mpg not later than MY 2020.\706\ Third, between MY 2011
and MY 2020, the standards must ``increase ratably'' in each model
year.\707\ This requirement does not have a precise mathematical
meaning, particularly because it must be interpreted in conjunction
with the requirement to set the standards for each model year at the
level determined to be the maximum feasible level for that model year.
Generally speaking, the requirement for ratable increases means that
the annual increases should not be disproportionately large or small in
relation to each other. The second and third requirements no longer
apply after MY 2020, at which point standards must simply be maximum
feasible. And fourth, EISA requires NHTSA to issue CAFE standards for
``at least 1, but not more than 5, model years.''\708\ This issue is
discussed in section IV.B above.
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\706\ 49 U.S.C. 32902(b)(2)(A).
\707\ 49 U.S.C. 32902(b)(2)(C).
\708\ 49 U.S.C. 32902(b)(3)(B).
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The following sections discuss the statutory factors behind
``maximum feasible'' in more detail.
i. Statutory Factors Considered in Determining the Achievable Level of
Average Fuel Economy
As none of the four factors is defined in EPCA and each remains
interpreted only to a limited degree by case law, NHTSA has
considerable latitude in interpreting them. NHTSA interprets the four
statutory factors as set forth below.
(1) Technological Feasibility
``Technological feasibility'' refers to whether a particular
technology for improving fuel economy is available or can become
available for commercial application in the model year for which a
standard is being established. Thus, the agency is not limited in
determining the level of new standards to technology that is already
being commercially applied at the time of the rulemaking. It can,
instead, set technology-forcing standards, i.e., ones that make it
necessary for manufacturers to engage in research and development in
order to bring a new technology to market. There are certain
technologies that the agency has considered for this rulemaking, for
example, that we know to be in the research phase now but which we are
fairly confident can be commercially applied by the rulemaking
timeframe, and very confident by the end of the rulemaking timeframe.
It is important to remember, however, that while the technological
feasibility factor may encourage the agency to look toward more
technology-forcing standards, and while this could certainly be
appropriate given EPCA's overarching purpose of energy conservation
depending on the rulemaking, that factor must also be balanced with the
other of the four statutory factors. Thus, while ``technological
feasibility'' can drive standards higher by assuming the use of
technologies that are not yet commercial, ``maximum feasible'' is still
also defined in terms of economic practicability, for example, which
might caution the agency against basing standards (even fairly distant
future standards) entirely on such technologies. By setting standards
at levels consistent with an analysis that assumes the use of these
nascent technologies at levels that seem reasonable, the agency
believes a more reasonable balance is ensured. Nevertheless, as the
``maximum feasible'' balancing may vary depending on the circumstances
at hand for the model years in which the standards are set, the extent
to which technological feasibility is simply met or plays a more
dynamic role may also shift.
(2) Economic Practicability
``Economic practicability'' refers to whether a standard is one
``within the financial capability of the industry, but not so stringent
as to'' lead to ``adverse economic consequences, such as a significant
loss of jobs or the unreasonable elimination of consumer choice.''
\709\ The agency has explained in the past that this factor can be
especially important during rulemakings in which the automobile
industry is facing significantly adverse economic conditions (with
corresponding risks to jobs). Consumer acceptability is also an element
of economic practicability, one which is particularly difficult to
gauge during times of uncertain fuel prices.\710\
[[Page 75224]]
In a rulemaking such as the present one, looking out into the more
distant future, economic practicability is a way to consider the
uncertainty surrounding future market conditions and consumer demand
for fuel economy in addition to other vehicle attributes. In an attempt
to ensure the economic practicability of attribute-based standards,
NHTSA considers a variety of factors, including the annual rate at
which manufacturers can increase the percentage of their fleet that
employ a particular type of fuel-saving technology, the specific fleet
mixes of different manufacturers, and assumptions about the cost of the
standards to consumers and consumers' valuation of fuel economy, among
other things.
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\709\ 67 FR 77015, 77021 (Dec. 16, 2002).
\710\ See, e.g., Center for Auto Safety v. NHTSA (CAS), 793 F.2d
1322 (DC Cir. 1986) (Administrator's consideration of market demand
as component of economic practicability found to be reasonable);
Public Citizen v. NHTSA, 848 F.2d 256 (Congress established broad
guidelines in the fuel economy statute; agency's decision to set
lower standard was a reasonable accommodation of conflicting
policies).
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At the same time, however, the law does not preclude a CAFE
standard that poses considerable challenges to any individual
manufacturer. The Conference Report for EPCA, as enacted in 1975, makes
clear, and the case law affirms, ``(A) determination of maximum
feasible average fuel economy should not be keyed to the single
manufacturer which might have the most difficulty achieving a given
level of average fuel economy.'' \711\ Instead, the agency is compelled
``to weigh the benefits to the nation of a higher fuel economy standard
against the difficulties of individual automobile manufacturers.''
\712\ The law permits CAFE standards exceeding the projected capability
of any particular manufacturer as long as the standard is economically
practicable for the industry as a whole. Thus, while a particular CAFE
standard may pose difficulties for one manufacturer, it may also
present opportunities for another. NHTSA has long held that the CAFE
program is not necessarily intended to maintain the competitive
positioning of each particular company. Rather, it is intended to
enhance the fuel economy of the vehicle fleet on American roads, while
protecting motor vehicle safety and being mindful of the risk to the
overall United States economy.
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\711\ CEI-I, 793 F.2d 1322, 1352 (DC Cir. 1986).
\712\ Id.
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Consequently, ``economic practicability'' must be considered in the
context of the competing concerns associated with different levels of
standards. Prior to the MY 2005-2007 rulemaking, the agency generally
sought to ensure the economic practicability of standards in part by
setting them at or near the capability of the ``least capable
manufacturer'' with a significant share of the market, i.e., typically
the manufacturer whose vehicles are, on average, the heaviest and
largest. In the first several rulemakings establishing attribute-based
standards, the agency applied marginal cost benefit analysis. This
ensured that the agency's application of technologies was limited to
those that would pay for themselves and thus should have significant
appeal to consumers. We note that for this rulemaking, the agency can
and has limited its application of technologies to those that are
projected to be cost-effective within the rulemaking time frame, with
or without the use of such analysis.
Whether the standards maximize net benefits has thus been a
touchstone in the past for NHTSA's consideration of economic
practicability. Executive Order 12866, as amended by Executive Order
13563, states that agencies should ``select, in choosing among
alternative regulatory approaches, those approaches that maximize net
benefits * * *'' In practice, however, agencies, including NHTSA, must
consider situations in which the modeling of net benefits does not
capture all of the relevant considerations of feasibility. In this
case, the NHTSA balancing of the statutory factors suggests that the
maximum feasible stringency for this rulemaking points to another level
besides the modeled net benefits maximum, and such a situation is well
within the guidance provided by EO's 12866 and 13563.\713\
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\713\ See 70 FR at 51435 (Aug. 30, 2005); CBD v. NHTSA, 538 F.3d
at 1197 (9th Cir. 2008).
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The agency's consideration of economic practicability depends on a
number of factors. Expected availability of capital to make investments
in new technologies matters; manufacturers' expected ability to sell
vehicles with new technologies matters; likely consumer choices matter;
and so forth. NHTSA's analysis of the impacts of this rulemaking does
incorporate assumptions to capture aspects of consumer preferences,
vehicle attributes, safety, and other factors relevant to an impact
estimate; however, it is difficult to capture every such constraint.
Therefore, it is well within the agency's discretion to deviate from a
modeled net benefits maximum in the face of evidence of economic
impracticability, and if the agency concludes that the modeled net
benefits maximum would not represent the maximum feasible level for
future CAFE standards. Economic practicability is a complex factor, and
like the other factors must also be considered in the context of the
overall balancing and EPCA's overarching purpose of energy
conservation. Depending on the conditions of the industry and the
assumptions used in the agency's analysis of alternative stringencies,
NHTSA could well find that standards that maximize net benefits, or
that are higher or lower, could be economically practicable, and thus
maximum feasible.
(3) The Effect of Other Motor Vehicle Standards of the Government on
Fuel Economy
``The effect of other motor vehicle standards of the Government on
fuel economy,'' involves an analysis of the effects of compliance with
emission, safety, noise, or damageability standards on fuel economy
capability and thus on average fuel economy. In previous CAFE
rulemakings, the agency has said that pursuant to this provision, it
considers the adverse effects of other motor vehicle standards on fuel
economy. It said so because, from the CAFE program's earliest years
\714\ until present, the effects of such compliance on fuel economy
capability over the history of the CAFE program have been negative
ones. In those instances in which the effects are negative, NHTSA has
said that it is called upon to ``mak[e] a straightforward adjustment to
the fuel economy improvement projections to account for the impacts of
other Federal standards, principally those in the areas of emission
control, occupant safety, vehicle damageability, and vehicle noise.
However, only the unavoidable consequences should be accounted for. The
automobile manufacturers must be expected to adopt those feasible
methods of achieving compliance with other Federal standards which
minimize any adverse fuel economy effects of those standards.'' \715\
For example, safety standards that have the effect of increasing
vehicle weight lower vehicle fuel economy capability and thus decrease
the level of average fuel economy that the agency can determine to be
feasible.
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\714\ 42 FR 63184, 63188 (Dec. 15, 1977). See also 42 FR 33534,
33537 (Jun. 30, 1977).
\715\ 42 FR 33534, 33537 (Jun. 30, 1977).
---------------------------------------------------------------------------
The ``other motor vehicle standards'' consideration has thus in
practice functioned in a fashion similar to the provision in EPCA, as
originally enacted, for adjusting the statutorily-specified CAFE
standards for MY 1978-1980 passengers cars.\716\ EPCA did not permit
NHTSA to amend those standards based on a finding that the maximum
feasible level of average fuel economy for any of those three years was
greater or less than the standard
[[Page 75225]]
specified for that year. Instead, it provided that the agency could
only reduce the standards and only on one basis: if the agency found
that there had been a Federal standards fuel economy reduction, i.e., a
reduction in fuel economy due to changes in the Federal vehicle
standards, e.g., emissions and safety, relative to the year of
enactment, 1975.
---------------------------------------------------------------------------
\716\ That provision was deleted as obsolete when EPCA was
codified in 1994.
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The ``other motor vehicle standards'' provision is broader than the
Federal standards fuel economy reduction provision. Although the
effects analyzed to date under the ``other motor vehicle standards''
provision have been negative, there could be circumstances in which the
effects are positive. In the event that the agency encountered such
circumstances, it would be required to consider those positive effects.
For example, if changes in vehicle safety technology led to NHTSA's
amending a safety standard in a way that permits manufacturers to
reduce the weight added in complying with that standard, that weight
reduction would increase vehicle fuel economy capability and thus
increase the level of average fuel economy that could be determined to
be feasible.
In the wake of Massachusetts v. EPA and of EPA's endangerment
finding, granting of a waiver to California for its motor vehicle GHG
standards, and its own establishment of GHG standards, NHTSA is
confronted with the issue of how to treat those standards under EPCA/
EISA, such as in the context of the ``other motor vehicle standards''
provision. To the extent the GHG standards result in increases in fuel
economy, they would do so almost exclusively as a result of inducing
manufacturers to install the same types of technologies used by
manufacturers in complying with the CAFE standards.
Comment is requested on whether and in what way the effects of the
California and EPA standards should be considered under EPCA/EISA,
e.g., under the ``other motor vehicle standards'' provision, consistent
with NHTSA's independent obligation under EPCA/EISA to issue CAFE
standards. The agency has already considered EPA's proposal and the
harmonization benefits of the National Program in developing its own
proposal.
(4) The Need of the United States To Conserve Energy
``The need of the United States to conserve energy'' means ``the
consumer cost, national balance of payments, environmental, and foreign
policy implications of our need for large quantities of petroleum,
especially imported petroleum.'' \717\ Environmental implications
principally include those associated with reductions in emissions of
criteria pollutants and CO2. A prime example of foreign
policy implications are energy independence and energy security
concerns.
---------------------------------------------------------------------------
\717\ 42 FR 63184, 63188 (1977).
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(a) Fuel Prices and the Value of Saving Fuel
Projected future fuel prices are a critical input into the
preliminary economic analysis of alternative CAFE standards, because
they determine the value of fuel savings both to new vehicle buyers and
to society, which is related to the consumer cost (or rather, benefit)
of our need for large quantities of petroleum. In this rule, NHTSA
relies on fuel price projections from the U.S. Energy Information
Administration's (EIA) most recent Annual Energy Outlook (AEO) for this
analysis. Federal government agencies generally use EIA's projections
in their assessments of future energy-related policies.
(b) Petroleum Consumption and Import Externalities
U.S. consumption and imports of petroleum products impose costs on
the domestic economy that are not reflected in the market price for
crude petroleum, or in the prices paid by consumers of petroleum
products such as gasoline. These costs include (1) Higher prices for
petroleum products resulting from the effect of U.S. oil import demand
on the world oil price; (2) the risk of disruptions to the U.S. economy
caused by sudden reductions in the supply of imported oil to the U.S.;
and (3) expenses for maintaining a U.S. military presence to secure
imported oil supplies from unstable regions, and for maintaining the
strategic petroleum reserve (SPR) to provide a response option should a
disruption in commercial oil supplies threaten the U.S. economy, to
allow the United States to meet part of its International Energy Agency
obligation to maintain emergency oil stocks, and to provide a national
defense fuel reserve. Higher U.S. imports of crude oil or refined
petroleum products increase the magnitude of these external economic
costs, thus increasing the true economic cost of supplying
transportation fuels above the resource costs of producing them.
Conversely, reducing U.S. imports of crude petroleum or refined fuels
or reducing fuel consumption can reduce these external costs.
(c) Air Pollutant Emissions
While reductions in domestic fuel refining and distribution that
result from lower fuel consumption will reduce U.S. emissions of
various pollutants, additional vehicle use associated with the rebound
effect \718\ from higher fuel economy will increase emissions of these
pollutants. Thus, the net effect of stricter CAFE standards on
emissions of each pollutant depends on the relative magnitudes of its
reduced emissions in fuel refining and distribution, and increases in
its emissions from vehicle use.\719\ Fuel savings from stricter CAFE
standards also result in lower emissions of CO2, the main
greenhouse gas emitted as a result of refining, distribution, and use
of transportation fuels. Reducing fuel consumption reduces carbon
dioxide emissions directly, because the primary source of
transportation-related CO2 emissions is fuel combustion in
internal combustion engines.
---------------------------------------------------------------------------
\718\ The ``rebound effect'' refers to the tendency of drivers
to drive their vehicles more as the cost of doing so goes down, as
when fuel economy improves.
\719\ See Section IV.G below for NHTSA's evaluation of this
effect.
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NHTSA has considered environmental issues, both within the context
of EPCA and the National Environmental Policy Act, in making decisions
about the setting of standards from the earliest days of the CAFE
program. As courts of appeal have noted in three decisions stretching
over the last 20 years,\720\ NHTSA defined the ``need of the Nation to
conserve energy'' in the late 1970s as including ``the consumer cost,
national balance of payments, environmental, and foreign policy
implications of our need for large quantities of petroleum, especially
imported petroleum.'' \721\ In 1988, NHTSA included climate change
concepts in its CAFE notices and prepared its first environmental
assessment addressing that subject.\722\ It cited concerns about
climate change as one of its reasons for limiting the extent of its
reduction of the CAFE standard for MY 1989 passenger cars.\723\ Since
then, NHTSA has considered the benefits of reducing tailpipe carbon
dioxide emissions in its fuel economy
[[Page 75226]]
rulemakings pursuant to the statutory requirement to consider the
nation's need to conserve energy by reducing fuel consumption.
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\720\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1325 n. 12
(DC Cir. 1986); Public Citizen v. NHTSA, 848 F.2d 256, 262-3 n. 27
(DC Cir. 1988) (noting that ``NHTSA itself has interpreted the
factors it must consider in setting CAFE standards as including
environmental effects''); and Center for Biological Diversity v.
NHTSA, 538 F.3d 1172 (9th Cir. 2007).
\721\ 42 FR 63184, 63188 (Dec. 15, 1977) (emphasis added).
\722\ 53 FR 33080, 33096 (Aug. 29, 1988).
\723\ 53 FR 39275, 39302 (Oct. 6, 1988).
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ii. Other Factors Considered by NHTSA
The agency historically has considered the potential for adverse
safety consequences in setting CAFE standards. This practice is
recognized approvingly in case law. As the courts have recognized,
``NHTSA has always examined the safety consequences of the CAFE
standards in its overall consideration of relevant factors since its
earliest rulemaking under the CAFE program.'' Competitive Enterprise
Institute v. NHTSA, 901 F.2d 107, 120 n. 11 (DC Cir. 1990) (``CEI I'')
(citing 42 FR 33534, 33551 (June 30, 1977)). The courts have
consistently upheld NHTSA's implementation of EPCA in this manner. See,
e.g., Competitive Enterprise Institute v. NHTSA, 956 F.2d 321, 322 (DC
Cir. 1992) (``CEI II'') (in determining the maximum feasible fuel
economy standard, ``NHTSA has always taken passenger safety into
account.'') (citing CEI I, 901 F.2d at 120 n. 11); Competitive
Enterprise Institute v. NHTSA, 45 F.3d 481, 482-83 (DC Cir. 1995)
(``CEI III'') (same); Center for Biological Diversity v. NHTSA, 538
F.3d 1172, 1203-04 (9th Cir. 2008) (upholding NHTSA's analysis of
vehicle safety issues associated with weight in connection with the MY
2008-11 light truck CAFE rule). Thus, in evaluating what levels of
stringency would result in maximum feasible standards, NHTSA assesses
the potential safety impacts and considers them in balancing the
statutory considerations and to determine the maximum feasible level of
the standards.
Under the universal or ``flat'' CAFE standards that NHTSA was
previously authorized to establish, manufacturers were encouraged to
respond to higher standards by building smaller, less safe vehicles in
order to ``balance out'' the larger, safer vehicles that the public
generally preferred to buy, which resulted in a higher mass
differential between the smallest and the largest vehicles, with a
correspondingly greater risk to safety. Under the attribute-based
standards being proposed today, that risk is reduced because building
smaller vehicles would tend to raise a manufacturer's overall CAFE
obligation, rather than only raising its fleet average CAFE, and
because all vehicles are required to continue improving their fuel
economy. In prior rulemakings, NHTSA limited the application of mass
reduction in our modeling analysis to vehicles over 5,000 lbs
GVWR,\724\ but for purposes of today's proposed standards, NHTSA has
revised its modeling analysis to allow some application of mass
reduction for most types of vehicles, although it is concentrated in
the largest and heaviest vehicles, because we believe that this is more
consistent with how manufacturers will actually respond to the
standards. However, as discussed above, NHTSA does not mandate the use
of any particular technology by manufacturers in meeting the standards.
More information on the approach to modeling manufacturer use of mass
reduction is available in Chapter 3 of the draft Joint TSD and in
Section V of the PRIA; and the estimated safety impacts that may be due
to the proposed MY 2017-2025 CAFE standards are described in section
IV.G below.
---------------------------------------------------------------------------
\724\ See 74 FR 14396-14407 (Mar. 30, 2009).
---------------------------------------------------------------------------
iii. Factors That NHTSA Is Prohibited From Considering
EPCA also provides that in determining the level at which it should
set CAFE standards for a particular model year, NHTSA may not consider
the ability of manufacturers to take advantage of several EPCA
provisions that facilitate compliance with the CAFE standards and
thereby reduce the costs of compliance.\725\ As discussed further
below, manufacturers can earn compliance credits by exceeding the CAFE
standards and then use those credits to achieve compliance in years in
which their measured average fuel economy falls below the standards.
Manufacturers can also increase their CAFE levels through MY 2019 by
producing alternative fuel vehicles. EPCA provides an incentive for
producing these vehicles by specifying that their fuel economy is to be
determined using a special calculation procedure that results in those
vehicles being assigned a high fuel economy level.
---------------------------------------------------------------------------
\725\ 49 U.S.C. 32902(h).
---------------------------------------------------------------------------
The effect of the prohibitions against considering these statutory
flexibilities in setting the CAFE standards is that the flexibilities
remain voluntarily-employed measures. If the agency were instead to
assume manufacturer use of those flexibilities in setting new
standards, that assumption would result in higher standards and thus
tend to require manufacturers to use those flexibilities. By keeping
NHTSA from including them in our stringency determination, the
provision ensures that the statutory credits remain described above
remain true compliance flexibilities.
On the other hand, NHTSA does not believe that flexibilities other
than those expressly identified in EPCA are similarly prohibited from
being included in the agency's determination of what standards would be
maximum feasible. In order to better meet EPCA's overarching purpose of
energy conservation, the agency is therefore considering manufacturers'
ability to increase the calculated fuel economy levels of their
vehicles through A/C efficiency improvements, as proposed by EPA, in
the proposed CAFE stringency levels for passenger cars and light trucks
for MYs 2017-2025. NHTSA would similarly consider manufacturers'
ability to raise their fuel economy using off-cycle technologies as
potentially relevant to our determination of maximum feasible CAFE
standards, but because we and EPA do not believe that we can yet
reasonably predict an average amount by which manufacturers will take
advantage of this opportunity, it did not seem reasonable for the
proposed standards to include it in our stringency determination at
this time. We expect to re-evaluate whether and how to include off-
cycle credits in determining maximum feasible standards as the off-
cycle technologies and how manufacturers may be expected to employ them
become better defined in the future.
Additionally, because we interpret the prohibition against
including the defined statutory credits in our determination of maximum
feasible standards as applying only to the flexibilities expressly
identified in 49 U.S.C. 32902(h), NHTSA must, for the first time in
this rulemaking, determine how to consider the fuel economy of dual-
fueled automobiles after the statutory credit sunsets in MY 2019. Once
there is no statutory credit to protect as a compliance flexibility, it
does not seem reasonable to NHTSA to continue to interpret the statute
as prohibiting the agency from setting maximum feasible levels at a
higher standard, if possible, by considering the fuel economy of dual-
fueled automobiles as measured by EPA. The overarching purpose of EPCA
is better served by interpreting 32902(h)(2) as moot once the statutory
credits provided for in 49 U.S.C. 32905 and 32906 have expired.
49 U.S.C. 32905(b) and (d) states that the special fuel economy
measurement prescribed by Congress for dual-fueled automobiles applies
only ``in model years 1993 through 2019.'' 49 U.S.C. 32906(a) also
provides that the section 32905 calculation will sunset in 2019, as
evidenced by the phase-out of the
[[Page 75227]]
allowable increase due to that credit; it is clear that the phase-out
of the allowable increase in a manufacturer's CAFE levels due to use of
dual-fueled automobiles relates only to the special statutory
calculation (and not to other ways of incorporating the fuel economy of
dual-fueled automobiles into the manufacturer's fleet calculation) by
virtue of language in section 32906(b), which states that ``in applying
subsection (a) [i.e., the phasing out maximum increase], the
Administrator of the Environmental Protection Agency shall determine
the increase in a manufacturer's average fuel economy attributable to
dual fueled automobiles by subtracting from the manufacturer's average
fuel economy calculated under section 32905(e) the number equal to what
the manufacturer's average fuel economy would be if it were calculated
by the formula under section 32904(a)(1). * * * '' By referring back to
the special statutory calculation, Congress makes clear that the phase-
out applies only to increases in fuel economy attributable to dual-
fueled automobiles due to the special statutory calculation in sections
32905(b) and (d). Similarly, we interpret Congress' statement in
section 32906(a)(7) that the maximum increase in fuel economy
attributable to dual-fueled automobiles is ``0 miles per gallon for
model years after 2019'' within the context of the introductory
language of section 32906(a) and the language of section 32906(b),
which, again, refers clearly to the statutory credit, and not to dual-
fueled automobiles generally. It would be an absurd result if the
phase-out of the credit meant that manufacturers would be effectively
penalized, in CAFE compliance, for building dual-fueled automobiles
like plug-in hybrid electric vehicles, which may be important
``bridge'' vehicles in helping consumers move toward full electric
vehicles.
NHTSA has therefore considered the fuel economy of plug-in hybrid
electric vehicles (the only dual-fueled automobiles that we predict in
significant numbers in MY 2020 and beyond; E85-capable FFVs are not
predicted in great numbers after the statutory credit sunsets, and we
do not have sufficient information about potential dual-fueled CNG/
gasoline vehicles to make reasonable estimates now of their numbers in
that time frame in determining the maximum feasible level of the MY
2020-2025 CAFE standards for passenger cars and light trucks.
iv. Determining the Level of the Standards by Balancing the Factors
NHTSA has broad discretion in balancing the above factors in
determining the appropriate levels of average fuel economy at which to
set the CAFE standards for each model year. Congress ``specifically
delegated the process of setting * * * fuel economy standards with
broad guidelines concerning the factors that the agency must
consider.'' \726\ The breadth of those guidelines, the absence of any
statutorily prescribed formula for balancing the factors and other
considerations, the fact that the relative weight to be given to the
various factors may change from rulemaking to rulemaking as the
underlying facts change, and the fact that the factors may often be
conflicting with respect to whether they militate toward higher or
lower standards give NHTSA broad discretion to decide what weight to
give each of the competing policies and concerns and then determine how
to balance them. The exercise of that discretion is subject to the
necessity of ensuring that NHTSA's balancing does not undermine the
fundamental purpose of EPCA, energy conservation,\727\ and as long as
that balancing reasonably accommodates ``conflicting policies that were
committed to the agency's care by the statute.'' \728\ The balancing of
the factors in any given rulemaking is highly dependent on the factual
and policy context of that rulemaking and the agency's assumptions
about the factual and policy context during the time frame covered by
the standards at issue. Given the changes over time in facts bearing on
assessment of the various factors, such as those relating to economic
conditions, fuel prices, and the state of climate change science, the
agency recognizes that what was a reasonable balancing of competing
statutory priorities in one rulemaking may or may not be a reasonable
balancing of those priorities in another rulemaking.\729\ Nevertheless,
the agency retains substantial discretion under EPCA to choose among
reasonable alternatives.
---------------------------------------------------------------------------
\726\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1341
(C.A.D.C. 1986).
\727\ Center for Biological Diversity v. NHTSA, 538 F.3d 1172,
1195 (9th Cir. 2008).
\728\ CAS, 1338 (quoting Chevron U.S.A., Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837, 845).
\729\ CBD v. NHTSA, 538 F.3d 1172, 1198 (9th Cir. 2008).
---------------------------------------------------------------------------
EPCA neither requires nor precludes the use of any type of cost-
benefit analysis as a tool to help inform the balancing process. As
discussed above, while NHTSA used marginal cost-benefit analysis in the
first two rulemakings to establish attribute-based CAFE standards, it
was not required to do so and is not required to continue to do so.
Regardless of what type of analysis is or is not used, considerations
relating to costs and benefits remain an important part of CAFE
standard setting.
Because the relevant considerations and factors can reasonably be
balanced in a variety of ways under EPCA, and because of uncertainties
associated with the many technological and cost inputs, NHTSA considers
a wide variety of alternative sets of standards, each reflecting
different balancing of those policies and concerns, to aid it in
discerning reasonable outcomes. Among the alternatives providing for an
increase in the standards in this rulemaking, the alternatives range in
stringency from a set of standards that increase, on average, 2 percent
annually to a set of standards that increase, on average, 7 percent
annually.
v. Other Standards
(1) Minimum Domestic Passenger Car Standard
The minimum domestic passenger car standard was added to the CAFE
program through EISA, when Congress gave NHTSA explicit authority to
set universal standards for domestically-manufactured passenger cars at
the level of 27.5 mpg or 92 percent of the average fuel economy of the
combined domestic and import passenger car fleets in that model year,
whichever was greater.\730\ This minimum standard was intended to act
as a ``backstop,'' ensuring that domestically-manufactured passenger
cars reached a given mpg level even if the market shifted in ways
likely to reduce overall fleet mpg. Congress was silent as to whether
the agency could or should develop similar backstop standards for
imported passenger cars and light trucks. NHTSA has struggled with this
question since EISA was enacted.
---------------------------------------------------------------------------
\730\ 49 U.S.C. 32902(b)(4).
---------------------------------------------------------------------------
NHTSA has proposed minimum standards for domestically-manufactured
passenger cars in Section IV.E below, but we also seek comment on
whether to consider, for the final rule, the possibility of minimum
standards for imported passenger cars and light trucks. Although we are
not proposing such standards, we believe it may be prudent to explore
this concept again given the considerable amount of time between now
and 2017-2025 (particularly the later years), and the accompanying
uncertainty in our market forecast and other assumptions,
[[Page 75228]]
that might make such minimum standards relevant to help ensure that
currently-expected fuel economy improvements occur during that time
frame. To help commenters' consideration of this question, Section IV.E
presents illustrative levels of minimum standards for those other
fleets.
The minimum domestic passenger car standard was added to the CAFE
program through EISA, when Congress gave NHTSA explicit authority to
set universal standards for domestically-manufactured passenger cars at
the level explained above. This minimum standard was intended to act as
a ``backstop,'' ensuring that domestically-manufactured passenger cars
reached a given mpg level even if the market shifted in ways likely to
reduce overall fleet mpg. Congress was silent as to whether the agency
could or should develop similar backstop standards for imported
passenger cars and light trucks. NHTSA has struggled with this question
since EISA was enacted.
In the MY 2011 final rule, facing comments split fairly evenly
between support and opposition to additional backstop standards, NHTSA
noted Congress' silence with respect to minimum standards for imported
passenger cars and light trucks and ``accept[ed] at least the
possibility that * * * [it] could be reasonably interpreted as
permissive rather than restrictive,'' but concluded based on the record
for that rulemaking as a whole that additional minimum standards were
not necessary for MY 2011, given the lack of leadtime for manufacturers
to change their MY 2011 vehicles, the apparently-growing public
preference for smaller vehicles, and the anti-backsliding
characteristics of the footprint-based curves.\731\
---------------------------------------------------------------------------
\731\ 74 FR at 14412 (Mar. 30, 2009).
---------------------------------------------------------------------------
In the MYs 2012-2016 final rule where NHTSA declined to set minimum
standards for imported passenger cars and light trucks, the agency did
so not because we believed that we did not have authority to do so, but
because we believed that our assumptions about the future fleet mix
were reliable within the rulemaking time frame, and that backsliding
was very unlikely and would not be sufficient to warrant the regulatory
burden of additional minimum standards for those fleets.\732\ NHTSA
also expressed concern about the possibility of additional minimum
standards imposing inequitable regulatory burdens of the kind that
attribute-based standards sought to avoid, stating that:
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\732\ 75 FR 25324, at 25368-70 (May 7, 2010).
Unless the backstop was at a very weak level, above the high end
of this range, then some percentage of manufacturers would be above
the backstop even if the performance of the entire industry remains
fully consistent with the emissions and fuel economy levels
projected for the final standards. For these manufacturers and any
other manufacturers who were above the backstop, the objectives of
an attribute-based standard would be compromised and unnecessary
costs would be imposed. This could directionally impose increased
costs for some manufacturers. It would be difficult if not
impossible to establish the level of a backstop standard such that
costs are likely to be imposed on manufacturers only when there is a
failure to achieve the projected reductions across the industry as a
whole. An example of this kind of industry-wide situation could be
when there is a significant shift to larger vehicles across the
industry as a whole, or if there is a general market shift from cars
to trucks. The problem the agencies are concerned about in those
circumstances is not with respect to any single manufacturer, but
rather is based on concerns over shifts across the fleet as a whole,
as compared to shifts in one manufacturer's fleet that may be more
than offset by shifts the other way in another manufacturer's fleet.
However, in this respect, a traditional backstop acts as a
manufacturer-specific standard.\733\
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\733\ Id. at 25369.
NHTSA continues to believe that the risk of additional minimum
standards imposing inequitable regulatory burdens on certain
manufacturers is real, but at the same time, we recognize that given
the time frame of the current rulemaking, the agency cannot be as
certain about the unlikelihood of future market changes. Depending on
the price of fuel and consumer preferences, the ``kind of industry-wide
situation'' described in the MYs 2012-2016 rule is possible in the
2017-2025 time frame, particularly in the later years.
Because the agency does not have sufficient information at this
time regarding what tradeoffs might be associated with additional
minimum standards, specifically, whether the risk of backsliding during
MYs 2017-2025 sufficiently outweighs the possibility of imposing
inequitable regulatory burdens on certain manufacturers, we are seeking
comment in this NPRM on these issues but not proposing additional
minimum standards at this time. We also seek comment on how to
structure additional minimum standards (e.g., whether they should be
flat or attribute-based, and if the latter, how that would work), and
at what level additional minimum standards should potentially be set.
The tables in Section IV.E provide an illustration of what levels the
additional minimum standards would require if the agency followed the
same 92 percent guideline required by EISA for domestically-
manufactured passenger cars.
(2) Alternative Standards for Certain Manufacturers
Because EPCA states that standards must be set for `` * * *
automobiles manufactured by manufacturers,'' and because Congress
provided specific direction on how small-volume manufacturers could
obtain exemptions from the passenger car standards, NHTSA has long
interpreted its authority as pertaining to setting standards for the
industry as a whole. Prior to this NPRM, some manufacturers raised with
NHTSA the possibility of NHTSA and EPA setting alternate standards for
part of the industry that met certain (relatively low) sales volume
criteria--specifically, that separate standards be set so that
``intermediate-size,'' limited-line manufacturers do not have to meet
the same levels of stringency that larger manufacturers have to meet
until several years later. These manufacturers argued that the same
level of standards would not be technologically feasible or
economically practicable in the same time frame for them, due to their
inability to spread compliance burden across a larger product lineup,
and difficulty in obtaining fuel economy-improving technologies quickly
from suppliers. NHTSA seeks comment on whether or how EPCA, as amended
by EISA, could be interpreted to allow such alternate standards for
certain parts of the industry.
2. Administrative Procedure Act
To be upheld under the ``arbitrary and capricious'' standard of
judicial review in the APA, an agency rule must be rational, based on
consideration of the relevant factors, and within the scope of the
authority delegated to the agency by the statute. The agency must
examine the relevant data and articulate a satisfactory explanation for
its action including a ``rational connection between the facts found
and the choice made.'' Burlington Truck Lines, Inc. v. United States,
371 U.S. 156, 168 (1962).
Statutory interpretations included in an agency's rule are
subjected to the two-step analysis of Chevron, U.S.A., Inc. v. Natural
Resources Defense Council, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694
(1984). Under step one, where a statute ``has directly spoken to the
precise question at issue,'' id. at 842, 104 S.Ct. 2778, the court and
the agency ``must give effect to the unambiguously
[[Page 75229]]
expressed intent of Congress,'' id. at 843, 104 S.Ct. 2778. If the
statute is silent or ambiguous regarding the specific question, the
court proceeds to step two and asks ``whether the agency's answer is
based on a permissible construction of the statute.'' Id.
If an agency's interpretation differs from the one that it has
previously adopted, the agency need not demonstrate that the prior
position was wrong or even less desirable. Rather, the agency would
need only to demonstrate that its new position is consistent with the
statute and supported by the record, and acknowledge that this is a
departure from past positions. The Supreme Court emphasized this
recently in FCC v. Fox Television, 129 S.Ct. 1800 (2009). When an
agency changes course from earlier regulations, ``the requirement that
an agency provide reasoned explanation for its action would ordinarily
demand that it display awareness that it is changing position,'' but
``need not demonstrate to a court's satisfaction that the reasons for
the new policy are better than the reasons for the old one; it suffices
that the new policy is permissible under the statute, that there are
good reasons for it, and that the agency believes it to be better,
which the conscious change of course adequately indicates.'' \734\ The
APA also requires that agencies provide notice and comment to the
public when proposing regulations,\735\ as we are doing here today.
---------------------------------------------------------------------------
\734\ Ibid., 1181.
\735\ 5 U.S.C. 553.
---------------------------------------------------------------------------
3. National Environmental Policy Act
As discussed above, EPCA requires the agency to determine what
level at which to set the CAFE standards for each model year by
considering the four factors of technological feasibility, economic
practicability, the effect of other motor vehicle standards of the
Government on fuel economy, and the need of the United States to
conserve energy. NEPA directs that environmental considerations be
integrated into that process. To accomplish that purpose, NEPA requires
an agency to compare the potential environmental impacts of its
proposed action to those of a reasonable range of alternatives.
To explore the environmental consequences in depth, NHTSA has
prepared a draft environmental impact statement (``EIS''). The purpose
of an EIS is to ``provide full and fair discussion of significant
environmental impacts and [to] inform decisionmakers and the public of
the reasonable alternatives which would avoid or minimize adverse
impacts or enhance the quality of the human environment.'' 40 CFR
1502.1.
NEPA is ``a procedural statute that mandates a process rather than
a particular result.'' Stewart Park & Reserve Coal., Inc. v. Slater,
352 F.3d at 557. The agency's overall EIS-related obligation is to
``take a `hard look' at the environmental consequences before taking a
major action.'' Baltimore Gas & Elec. Co. v. Natural Res. Def. Council,
Inc., 462 U.S. 87, 97, 103 S.Ct. 2246, 76 L.Ed.2d 437 (1983).
Significantly, ``[i]f the adverse environmental effects of the proposed
action are adequately identified and evaluated, the agency is not
constrained by NEPA from deciding that other values outweigh the
environmental costs.'' Robertson v. Methow Valley Citizens Council, 490
U.S. 332, 350, 109 S.Ct. 1835, 104 L.Ed.2d 351 (1989).
The agency must identify the ``environmentally preferable''
alternative, but need not adopt it. ``Congress in enacting NEPA * * *
did not require agencies to elevate environmental concerns over other
appropriate considerations.'' Baltimore Gas and Elec. Co. v. Natural
Resources Defense Council, Inc., 462 U.S. 87, 97 (1983). Instead, NEPA
requires an agency to develop alternatives to the proposed action in
preparing an EIS. 42 U.S.C. 4332(2)(C)(iii). The statute does not
command the agency to favor an environmentally preferable course of
action, only that it make its decision to proceed with the action after
taking a hard look at environmental consequences.
E. What are the proposed CAFE standards?
1. Form of the Standards
Each of the CAFE standards that NHTSA is proposing today for
passenger cars and light trucks is expressed as a mathematical function
that defines a fuel economy target applicable to each vehicle model
and, for each fleet, establishes a required CAFE level determined by
computing the sales-weighted harmonic average of those targets.\736\
---------------------------------------------------------------------------
\736\ Required CAFE levels shown here are estimated required
levels based on NHTSA's current projection of manufacturers' vehicle
fleets in MYs 2017-2025. Actual required levels are not determined
until the end of each model year, when all of the vehicles produced
by a manufacturer in that model year are known and their compliance
obligation can be determined with certainty. The target curves, as
defined by the constrained linear function, and as embedded in the
function for the sales-weighted harmonic average, are the real
``standards'' being proposed today.
---------------------------------------------------------------------------
As discussed above in Section II.C, NHTSA has determined passenger
car fuel economy targets using a constrained linear function defined
according to the following formula:
[GRAPHIC] [TIFF OMITTED] TP01DE11.180
Here, TARGET is the fuel economy target (in mpg) applicable to
vehicles of a given footprint (FOOTPRINT, in square feet), b and a are
the function's lower and upper asymptotes (also in mpg), respectively,
c is the slope (in gallons per mile per square foot) of the sloped
portion of the function, and d is the intercept (in gallons per mile)
of the sloped portion of the function (that is, the value the sloped
portion would take if extended to a footprint of 0 square feet). The
MIN and MAX functions take the minimum and maximum, respectively of the
included values.
NHTSA is proposing, consistent with the standards for MYs 2011-
2016, that the CAFE level required of any given manufacturer be
determined by calculating the production-weighted harmonic average of
the fuel economy targets applicable to each vehicle model:
[GRAPHIC] [TIFF OMITTED] TP01DE11.181
PRODUCTIONi is the number of units produced for sale in
the United States of each i\th\ unique footprint within each model
type, produced for sale in the United States, and TARGETi is
the corresponding fuel economy target (according to the equation shown
above and based on the corresponding
[[Page 75230]]
footprint), and the summations in the numerator and denominator are
both performed over all unique footprint and model type combinations in
the fleet in question.
The proposed standards for passenger cars are, therefore, specified
by the four coefficients defining fuel economy targets:
a = upper limit (mpg)
b = lower limit (mpg)
c = slope (gallon per mile per square foot)
d = intercept (gallon per mile)
For light trucks, NHTSA is proposing to define fuel economy targets
in terms of a mathematical function under which the target is the
maximum of values determined under each of two constrained linear
functions. The second of these establishes a ``floor'' reflecting the
MY 2016 standard, after accounting for estimated adjustments reflecting
increased air conditioner efficiency. This prevents the target at any
footprint from declining between model years. The resultant
mathematical function is as follows:
[GRAPHIC] [TIFF OMITTED] TP01DE11.182
The proposed standards for light trucks are, therefore, specified
by the eight coefficients defining fuel economy targets:
a = upper limit (mpg)
b = lower limit (mpg)
c = slope (gallon per mile per square foot)
d = intercept (gallon per mile)
e = upper limit (mpg) of ``floor''
f = lower limit (mpg) of ``floor''
g = slope (gallon per mile per square foot) of ``floor''
h = intercept (gallon per mile) of ``floor''
2. Passenger Car Standards for MYs 2017-2025
For passenger cars, NHTSA is proposing CAFE standards defined by
the following coefficients during MYs 2017-2025:
[GRAPHIC] [TIFF OMITTED] TP01DE11.183
For reference, the coefficients defining the MYs 2012-2016
passenger car standards are also provided below:
[GRAPHIC] [TIFF OMITTED] TP01DE11.184
[[Page 75231]]
Also for reference, the following table presents the coefficients
based on 2-cycle CAFE only for easier comparison to the MYs 2012-2016
coefficients presented above. We emphasize, again, that the
coefficients in Table IV-11 define the proposed standards.
[GRAPHIC] [TIFF OMITTED] TP01DE11.185
Section II.C above and Chapter 2 of the draft Joint TSD discusses
how the coefficients in Table IV-11 were developed for this proposed
rule. The proposed coefficients result in the footprint-dependent
targets shown graphically below for MYs 2017-2025. The MY 2012-2016
final standards are also shown for comparison.
BILLING CODE 4910-59-P
[[Page 75232]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.186
As discussed, the CAFE levels ultimately required of individual
manufacturers will depend on the mix of vehicles they produce for sale
in the United States. Based on the market forecast of future sales that
NHTSA has used to examine today's proposed CAFE standards, the agency
currently estimates that the target curves shown above will result in
the following average required fuel economy levels for individual
manufacturers during MYs 2017-2025 (an updated estimate of the average
required fuel economy level under the final MY 2016 standard is also
shown for comparison): \737\
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\737\ In the May 2010 final rule establishing MY 2016 standards
for passenger cars and light trucks, NHTSA estimated that the
required fuel economy levels for passenger cars would average 37.8
mpg under the MY 2016 passenger car standard. Based on the agency's
current forecast of the MY 2016 passenger car market, NHTSA again
estimates that the average required fuel economy level for passenger
cars will be 37.8 mpg in MY 2016.
\738\ For purposes of CAFE compliance, ``Chrysler/Fiat'' is
assumed to include Ferrari and Maserati in addition to the larger-
volume Chrysler and Fiat brands.
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[[Page 75233]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.187
[[Page 75234]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.188
Because a manufacturer's required average fuel economy level for a
model year under the final standards will be based on its actual
production numbers in that model year, its official required fuel
economy level will not be known until the end of that model year.
However, because the targets for each vehicle footprint will be
established in advance of the model year, a manufacturer should be able
to estimate its required level accurately. Readers should remember that
the mpg levels describing the ``estimated required standards'' shown
throughout this section are not necessarily the ultimate mpg level with
which manufacturers will have to comply, for the reasons explained
above, and that the mpg level designated as ``estimated required'' is
exactly that, an estimate.
---------------------------------------------------------------------------
\739\ For purposes of CAFE compliance, VW is assumed to include
Audi-Bentley, Bugatti, and Lamborghini, along with the larger-volume
VW brand.
---------------------------------------------------------------------------
Additionally, again for reference, the following table presents
estimated mpg levels based on 2-cycle CAFE for easier comparison to the
MYs 2012-2016 standards.
[[Page 75235]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.189
3. Minimum Domestic Passenger Car Standards
EISA expressly requires each manufacturer to meet a minimum fuel
economy standard for domestically manufactured passenger cars in
addition to meeting the standards set by NHTSA. According to the
statute (49 U.S.C. 32902(b)(4)), the minimum standard shall be the
greater of (A) 27.5 miles per gallon; or (B) 92 percent of the average
fuel economy projected by the Secretary for the combined domestic and
nondomestic passenger automobile fleets manufactured for sale in the
United States by all manufacturers in
[[Page 75236]]
the model year. The agency must publish the projected minimum standards
in the Federal Register when the passenger car standards for the model
year in question are promulgated. As a practical matter, as standards
for both cars and trucks continue to rise over time, 49 U.S.C.
32902(b)(4)(A) will likely eventually cease to be relevant.
---------------------------------------------------------------------------
\740\ For purposes of CAFE compliance, ``Chrysler/Fiat'' is
assumed to include Ferrari and Maserati in addition to the larger-
volume Chrysler and Fiat brands.
\741\ For purposes of CAFE compliance, VW is assumed to include
Audi-Bentley, Bugatti, and Lamborghini, along with the larger-volume
VW brand.
---------------------------------------------------------------------------
As discussed in the final rule establishing the MYs 2012-2016 CAFE
standards, because 49 U.S.C. 32902(b)(4)(B) states that the minimum
domestic passenger car standard shall be 92 percent of the projected
average fuel economy for the passenger car fleet, ``which projection
shall be published in the Federal Register when the standard for that
model year is promulgated in accordance with this section,'' NHTSA
interprets EISA as indicating that the minimum domestic passenger car
standard should be based on the agency's fleet assumptions when the
passenger car standard for that year is promulgated.
However, we note that we do not read this language to preclude any
change, ever, in the minimum standard after it is first promulgated for
a model year. As long as the 18-month lead-time requirement of 49
U.S.C. 32902(a) is respected, NHTSA believes that the language of the
statute suggests that the 92 percent should be determined anew any time
the passenger car standards are revised. This issue will be
particularly relevant for the current rulemaking, given the
considerable leadtime involved and the necessity of a mid-term review
for the MYs 2022-2025 standards. We seek comment on this
interpretation, and on whether or not the agency should consider
instead for MYs 2017-2025 designating the minimum domestic passenger
car standards proposed here as ``estimated,'' just as the passenger car
standards are ``estimated,'' and waiting until the end of each model
year to finalize the 92 percent mpg value.
We note also that in the MYs 2012-2016 final rule, we interpreted
EISA as indicating that the 92 percent minimum standard should be based
on the estimated required CAFE level rather than, as suggested by the
Alliance, the estimated achieved CAFE level (which would likely be
lower than the estimated required level if it reflected manufacturers'
use of dual-fuel vehicle credits under 49 U.S.C. 32905, at least in the
context of the MYs 2012-2016 standards). NHTSA continues to believe
that this interpretation is appropriate.
Based on NHTSA's current market forecast, the agency's estimates of
these minimum standards under the proposed MYs 2017-2025 CAFE standards
(and, for comparison, the final MY 2016 minimum domestic passenger car
standard) are summarized below in Table IV-16.
[GRAPHIC] [TIFF OMITTED] TP01DE11.190
Again, for the reader's reference, the following table the
following table presents estimated mpg levels based on 2-cycle CAFE for
easier comparison to the MYs 2012-2016 standards.
[GRAPHIC] [TIFF OMITTED] TP01DE11.191
As discussed in Section IV.D above, NHTSA is also seeking comment
on whether to consider, for the final rule, the possibility of minimum
standards for imported passenger cars and light trucks. Although we are
not proposing
[[Page 75237]]
such standards, we believe it may be prudent to explore this concept
again given the considerable amount of time between now and 2017-2025
(particularly the later years), and the accompanying uncertainty in our
market forecast and other assumptions, that might make such minimum
standards relevant to help ensure that currently-expected fuel economy
improvements occur during that time frame. To help commenters'
consideration of this question, illustrative levels of minimum
standards for those other fleets are presented below.
[GRAPHIC] [TIFF OMITTED] TP01DE11.192
NHTSA emphasizes again that we are not proposing additional minimum
standards for imported passenger cars and light trucks at this time,
but we may consider including them in the final rule if it seems
reasonable and appropriate to do so based on the information provided
by commenters and the agency's analysis. NHTSA also may wait until we
are able to observe potential market changes during the implementation
of the MYs 2012-2016 standards and consider additional minimum
standards in a future rulemaking action. Any additional minimum
standards for MYs 2022-2025 that may be set in the future would, like
the primary standards, be subject to the mid-term review discussed in
Section IV.B above, and potentially revised at that time.
4. Light Truck Standards
For light trucks, NHTSA is proposing CAFE standards defined by the
following coefficients during MYs 2017-2025:
[[Page 75238]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.193
For reference, the coefficients defining the MYs 2012-2016 light
truck standards (which did not include a ``floor'' term defined by
coefficients e, f, g, and h) are also provided below:
[GRAPHIC] [TIFF OMITTED] TP01DE11.194
The proposed coefficients result in the footprint-dependent targets
shown graphically below for MYs 2017-2025. MYs 2012-2016 final
standards are shown for comparison.
BILLING CODE 4910-59-9
[[Page 75239]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.195
BILLING CODE 4910-59-C
Also for reference, the following table presents the coefficients
based on2-cycle CAFE only for easier comparison to the MYs 2012-2016
coefficients presented above. We emphasize, again, that the
coefficients in Table IV-20 define the proposed standards.
[[Page 75240]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.196
Again, given these targets, the CAFE levels required of individual
manufacturers will depend on the mix of vehicles they produce for sale
in the United States. Based on the market forecast NHTSA has used to
examine today's proposed CAFE standards, the agency currently estimates
that the targets shown above will result in the following average
required fuel economy levels for individual manufacturers during MYs
2017-2025 (an updated estimate of the average required fuel economy
level under the final MY 2016 standard is shown for comparison): \742\
---------------------------------------------------------------------------
\742\ In the May 2010 final rule establishing MYs 2012-2016
standards for passenger cars and light trucks, NHTSA estimated that
the required fuel economy levels for light trucks would average 28.8
mpg under the MY 2016 light truck standard. Based on the agency's
current forecast of the MY 2016 light truck market, NHTSA again
estimates that the required fuel economy levels will average 28.8
mpg in MY 2016. However, the agency's market forecast reflects less
of a future market shift away from light trucks than reflected in
the agency's prior market forecast; as a result, NHTSA currently
estimates that the combined (i.e., passenger car and light truck)
average required fuel economy in MY 2016 will be 33.8 mpg, 0.3 mpg
lower than the agency's earlier estimate of 34.1 mpg. The agency has
made no changes to MY 2016 standards and projects no changes in
fleet-specific average requirements (although within-fleet market
shifts could, under an attribute-based standard, produce such
changes).
---------------------------------------------------------------------------
BILLING CODE 4910-59-P
[[Page 75241]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.197
BILLING CODE 4910-59-C
As discussed above with respect to the proposed passenger cars
standards, we note that a manufacturer's required light truck fuel
economy level for a model year under the ultimate final standards will
be based on its actual production numbers in that model year.
---------------------------------------------------------------------------
\743\ For purposes of CAFE compliance, ``Chrysler/Fiat'' is
assumed to include Ferrari and Maserati in addition to the larger-
volume Chrysler and Fiat brands.
\744\ For purposes of CAFE compliance, VW is assumed to include
Audi-Bentley, Bugatti, and Lamborghini, along with the larger-volume
VW brand.
---------------------------------------------------------------------------
Additionally, again for reference, the following table presents
estimated mpg levels based on 2-cycle CAFE for easier comparison to the
MYs 2012-2016 standards.
BILLING CODE 4910-59-P
[[Page 75242]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.198
BILLING CODE 4910-59-C
F. How do the proposed standards fulfill NHTSA's statutory obligations?
The discussion that follows is necessarily complex, but the central
points are straightforward. NHTSA has tentatively concluded that the
standards presented above in Section IV.E are the maximum feasible
standards for passenger cars and light trucks in MYs 2017-2025. EPCA/
EISA requires NHTSA to consider four statutory factors in determining
the maximum feasible CAFE standards in a rulemaking: Specifically,
technological
[[Page 75243]]
feasibility, economic practicability, the effect of other motor vehicle
standards of the Government on fuel economy, and the need of the nation
to conserve energy. The agency considered a number of regulatory
alternatives in its analysis of potential CAFE standards for those
model years, including several that increase stringency on average at
set percentages each year, one that approximates the point at which the
modeled net benefits are maximized in each model year, and one that
approximates the point at which the modeled total costs equal total
benefits in each model year. Some of those alternatives represent
standards that would be more stringent than the proposed
standards,\747\ and some are less stringent.\748\ As the discussion
below explains, we tentatively conclude that the correct balancing of
the relevant factors that the agency must consider in determining the
maximum feasible standards recognizes economic practicability concerns
as discussed below, and sets standards accordingly. We expect that the
proposed standards will enable further research and development into
the more advanced fuel economy-improving technologies, and enable
significant fuel savings and environmental benefits throughout the
program, with particularly substantial benefits in the later years of
the program and beyond. Additionally, consistent with Executive Order
13563, the agency believes that the benefits of the preferred
alternative amply justify the costs; indeed, the monetized benefits
exceed the monetized costs by $358 billion over the lifetime of the
vehicles covered by the proposed standards. In full consideration of
all of the information currently before the agency, we have weighed the
statutory factors carefully and selected proposed passenger car and
light truck standards that we believe are the maximum feasible for MYs
2017-2025.
---------------------------------------------------------------------------
\745\ For purposes of CAFE compliance, ``Chrysler/Fiat'' is
assumed to include Ferrari and Maserati in addition to the larger-
volume Chrysler and Fiat brands.
\746\ for purposes of CAFE compliance, VW is assumed to include
Audi-Bentley, Bugatti, and Lamborghini, along with the larger-volume
VW brand.
\747\ We recognize that higher standards would help the need of
the nation to conserve more energy and might potentially be
technologically feasible (in the narrowest sense) during those model
years, but based on our analysis and the evidence presented by the
industry, we tentatively conclude that higher standards would not
represent the proper balancing for MYs 2017-2025 cars and trucks,
because they would raise serious questions about economic
practicability. As explained above, NHTSA's modeled estimates
necessarily do not perfectly capture all of the factors of economic
practicability, and this conclusion regarding net benefits versus
economic practicability is similar to the conclusion reached in the
2012-2016 analysis.
\748\ We also recognize that lower standards might be less
burdensome on the industry, but considering the environmental
impacts of the different regulatory alternatives as required under
NEPA and the need of the nation to conserve energy, we do not
believe they would have represented the appropriate balancing of the
relevant factors, because they would have left technology, fuel
savings, and emissions reductions on the table unnecessarily, and
not contributed as much as possible to reducing our nation's energy
security and climate change concerns. They would also have lower net
benefits than the Preferred Alternative.
---------------------------------------------------------------------------
1. What are NHTSA's statutory obligations?
As discussed above in Section IV.D, NHTSA sets CAFE standards under
EPCA, as amended by EISA, and is also subject to the APA and NEPA in
developing and promulgating CAFE standards.
NEPA requires the agency to develop and consider the findings of an
Environmental Impact Statement (EIS) for ``major Federal actions
significantly affecting the quality of the human environment.'' NHTSA
has determined that this action is such an action and therefore that an
EIS is necessary, and has accordingly prepared a Draft EIS to inform
its development and consideration of the proposed standards. The agency
has evaluated the environmental impacts of a range of regulatory
alternatives in our proposal, and integrated the results of that
consideration into our balancing of the EPCA/EISA factors, as discussed
below.
The APA and relevant case law requires our rulemaking decision to
be rational, based on consideration of the relevant factors, and within
the scope of the authority delegated to the agency by EPCA/EISA. The
relevant factors are those required by EPCA/EISA and the additional
factors approved in case law as ones historically considered by the
agency in determining the maximum feasible CAFE standards, such as
safety. The statute requires us to set standards at the maximum
feasible level for passenger cars and light trucks for each model year,
and the agency tentatively concludes that the standards, if adopted as
proposed, would satisfy this requirement. NHTSA has carefully examined
the relevant data and other considerations, as discussed below in our
explanation of our tentative conclusion that the proposed standards are
the maximum feasible levels for those model years based on our
evaluation of the information before us for this NPRM.
As discussed in Section IV.D, EPCA/EISA requires that NHTSA
establish separate passenger car and light truck standards at ``the
maximum feasible average fuel economy level that it decides the
manufacturers can achieve in that model year,'' based on the agency's
consideration of four statutory factors: Technological feasibility,
economic practicability, the effect of other standards of the
Government on fuel economy, and the need of the nation to conserve
energy.\749\ NHTSA has developed definitions for these terms over the
course of multiple CAFE rulemakings\750\ and determines the appropriate
weight and balancing of the terms given the circumstances in each CAFE
rulemaking. For MYs 2011-2020, EPCA further requires that separate
standards for passenger cars and for light trucks be set at levels high
enough to ensure that the CAFE of the industry-wide combined fleet of
new passenger cars and light trucks reaches at least 35 mpg not later
than MY 2020. For model years after 2020, standards need simply be set
at the maximum feasible level.
---------------------------------------------------------------------------
\749\ As explained in Section IV.D, EPCA also provides that in
determining the level at which it should set CAFE standards for a
particular model year, NHTSA may not consider the ability of
manufacturers to take advantage of several statutory provisions that
facilitate compliance with the CAFE standards and thereby reduce the
costs of compliance. Specifically, in determining the maximum
feasible level of fuel economy for passenger cars and light trucks,
NHTSA cannot consider the fuel economy benefits of ``dedicated''
alternative fuel vehicles (like battery electric vehicles or natural
gas vehicles), must consider dual-fueled automobiles to be operated
only on gasoline or diesel fuel (at least through MY 2019), and may
not consider the ability of manufacturers to use, trade, or transfer
credits. This provision limits, to some extent, the fuel economy
levels that NHTSA can find to be ``maximum feasible''--if NHTSA
cannot consider the fuel economy of electric vehicles, for example,
NHTSA cannot set standards predicated on manufacturers' usage of
electric vehicles to meet the standards.
\750\ These factors are defined in Section IV.D; for brevity, we
do not repeat those definitions here.
---------------------------------------------------------------------------
The agency thus balances the relevant factors to determine the
maximum feasible level of the CAFE standards for each fleet, in each
model year. The next section discusses how the agency balanced the
factors for this proposal, and why we believe the proposed standards
are the maximum feasible.
2. How did the agency balance the factors for this NPRM?
There are numerous ways that the relevant factors can be balanced
(and thus weight given to each factor) depending on the agency's policy
priorities and on the information before the agency regarding any given
model year, and the agency therefore considered a range of alternatives
that represent different regulatory options that we thought were
potentially reasonable for purposes of this rulemaking. For this
proposal, the regulatory alternatives considered in the agency's
analysis include several alternatives for fuel economy levels that
increase annually, on average, at set rates--specifically, 2%/year, 3%/
year, 4%/year, 5%/year, 6%/year, and 7%/
[[Page 75244]]
year.\751\ Analysis of these various rates of increase effectively
encompasses the entire range of fuel economy improvements that, based
on information currently available to the agency, could conceivably
fall within the statutory boundary of ``maximum feasible'' standards.
The regulatory alternatives also include two alternatives based on
benefit-cost criteria, one in which standards would be set at the point
where the modeled net benefits would be maximized for each fleet in
each year (MNB), and another in which standards would be set at the
point at which total costs would be most nearly equal to total benefits
for each fleet in each year (TC=TB),\752\ as well as the preferred
alternative, which is within the range of the other alternatives. These
alternatives are discussed in more detail in Chapter III of the PRIA
accompanying this NPRM, which also contains an extensive analysis of
the relative impacts of the alternatives in terms of fuel savings,
costs (both per-vehicle and aggregate), carbon dioxide emissions
avoided, and many other metrics. Because the agency could conceivably
select any of the regulatory alternatives above, all of which fall
between 2%/year and 7%/year, inclusive, the Draft EIS that accompanies
this proposal analyzes these lower and upper bounds as well as the
preferred alternative. Additionally, the Draft EIS analyzes a ``No
Action Alternative,'' which assumes that, for MYs 2017 and beyond,
NHTSA would set standards at the same level as MY 2016. The No Action
Alternative provides a baseline for comparing the environmental impacts
of the other alternatives.
---------------------------------------------------------------------------
\751\ This is an approach similar to that used by the agency in
the MY 2012-2016 rulemaking, in which we also considered several
alternatives that increased annually, on average, at 3%, 4%, 5%, 6%
and 7%/year. The ``percent-per-year'' alternatives in this proposal
are somewhat different from those considered in the MY 2012-2016
rulemaking, however, in terms of how the annual rate of increase is
applied. For this proposal, the stringency curves are themselves
advanced directly by the annual increase amount, without reference
to any yearly changes in the fleet mix. In the 2012-2016 rule, the
annual increases for the stringency alternatives reflected the
estimated required fuel economy of the fleet which accounted for
both the changes in the target curves and changes in the fleet mix.
\752\ We included the MNB and TC=TB alternatives in part for the
reference of commenters familiar with NHTSA's past several CAFE
rulemakings--these alternatives represent balancings carefully
considered by the agency in past rulemaking actions as potentially
maximum feasible--and because Executive Orders 12866 and 13563 focus
attention on an approach that maximizes net benefits. The assessment
of maximum net benefits is challenging in the context of setting
CAFE standards, in part because standards which maximize net
benefits for each fleet, for each model year, would not necessarily
be the standards that lead to the greatest net benefits over the
entire rulemaking period.
---------------------------------------------------------------------------
NHTSA believes that this approach clearly communicates the level of
stringency of each alternative and allows us to identify alternatives
that represent different ways to balance NHTSA's statutory factors
under EPCA/EISA. Each of the listed alternatives represents, in part, a
different way in which NHTSA could conceivably balance different
policies and considerations in setting the standards that achieve the
maximum feasible levels. For example, the 2% Alternative, the least
stringent alternative, would represent a balancing in which economic
practicability--which include concerns about availability of
technology, capital, and consumer preferences for vehicles built to
meet the future standards--weighs more heavily in the agency's
consideration, and the need of the nation to conserve energy would
weigh less heavily. In contrast, under the 7% Alternative, one of the
most stringent, the need of the nation to conserve energy--which
includes energy conservation and climate change considerations--would
weigh more heavily in the agency's consideration, and other factors
would weigh less heavily. Balancing and assessing the feasibility of
different alternative can also be influenced by differences and
uncertainties in the way in which key economic factors (e.g., the price
of fuel and the social cost of carbon) and technological inputs could
be assessed and estimated or valued. While NHTSA believes that our
analysis conducted in support of this NPRM uses the best and most
transparent technology-related inputs and economic assumption inputs
that the agencies could derive for MYs 2017-2025, we recognize that
there is uncertainty in these inputs, and the balancing could be
different if, for example, the inputs are adjusted in response to new
information.
This is the first CAFE rulemaking in which the agency has looked
this far into the future, which makes our traditional approach to
balancing more challenging than in past (even recent past) rulemakings.
NHTSA does not presently believe, for example, that technological
feasibility as the agency defines it is as constraining in this
rulemaking as it has been in the past in light of the time frame of
this rulemaking. ``Technological feasibility'' refers to whether a
particular method of improving fuel economy can be available for
commercial application in the model year for which a standard is being
established. In previous CAFE rulemakings, it has been more difficult
for the agency to say that the most advanced technologies would be
available for commercial application in the model years for which
standards were being established. For this rulemaking, which is longer
term, NHTSA has considered all types of technologies that improve real-
world fuel economy, including air-conditioner efficiency and other off-
cycle technology, PHEVs, EVs, and highly-advanced internal combustion
engines not yet in production, but all of which the agencies' expect to
be commercially applicable by the rulemaking time frame. On the one
hand, we recognize that some technologies that currently have limited
commercial use cannot be deployed on every vehicle model in MY 2017,
but require a realistic schedule for widespread commercialization to be
feasible. On the other hand, however, the agency expects, based on our
analysis, that all of the alternatives could narrowly be considered as
technologically feasible, in that they could be achieved based on the
existence or projected future existence of technologies that could be
incorporated on future vehicles, and enable any of the alternatives to
be achieved on a technical basis alone if the level of resources that
might be required to implement the technologies is not considered. If
all alternatives are at least theoretically technologically feasible in
the MY 2017-2025 timeframe, and the need of the nation is best served
by pushing standards as stringent as possible, then the agency might be
inclined to select the alternative that results in the very most
stringent standards considered.
However, the agency must also consider what is required to
practically implement technologies, which is part of economic
practicability, and to which the most stringent alternatives give
little weight. ``Economic practicability'' refers to whether a standard
is one ``within the financial capability of the industry, but not so
stringent as to lead to adverse economic consequences, such as a
significant loss of jobs or the unreasonable elimination of consumer
choice.'' Consumer acceptability is also an element of economic
practicability, one that is particularly difficult to gauge during
times of uncertain fuel prices.\753\ In a rulemaking such as the
present one,
[[Page 75245]]
determining economic practicability requires consideration of the
uncertainty surrounding relatively distant future market conditions and
consumer demand for fuel economy in addition to other vehicle
attributes. In an attempt to evaluate the economic practicability of
attribute-based standards, NHTSA includes a variety of factors in its
analysis, including the annual rate at which manufacturers can increase
the percentage of their fleet that employ a particular type of fuel-
saving technology, the specific fleet mixes of different manufacturers,
and assumptions about the cost of the standards to consumers and
consumers' valuation of fuel economy, among other things. Ensuring that
a reasonable amount of lead time exists to make capital investments and
to devote the resources and time to design and prepare for commercial
production of a more fuel efficient fleet is also relevant to the
agency's consideration of economic practicability. Yet there are some
aspects of economic practicability that the agency's analysis is not
able to capture at this time--for example, the computer model that we
use to analyze alternative standards does not account for all aspects
of uncertainty, in part because the agency cannot know what we cannot
know. The agency must thus account for uncertainty in the context of
economic practicability as best as we can based on the entire record
before us.
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\753\ See, e.g., Center for Auto Safety v. NHTSA (CAS), 793 F.2d
1322 (DC Cir. 1986) (Administrator's consideration of market demand
as component of economic practicability found to be reasonable);
Public Citizen v. NHTSA, 848 F.2d 256 (Congress established broad
guidelines in the fuel economy statute; agency's decision to set
lower standard was a reasonable accommodation of conflicting
policies).
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Both technological feasibility and economic practicability enter
into the agency's determination of the maximum feasible levels of
stringency, and economic practicability concerns may cause the agency
to decide that standards that might be technologically feasible are, in
fact, beyond maximum feasible. Standards that require aggressive
application of and widespread deployment of advanced technologies could
raise serious issues with the adequacy of time to coordinate such
significant changes with manufacturers' redesign cycles, as well as
with the availability of engineering resources to develop and integrate
the technologies into products, and the pace at which capital costs can
be incurred to acquire and integrate the manufacturing and production
equipment necessary to increase the production volume of the
technologies. Moreover, the agency must consider whether consumers
would be likely to accept a specific technological change under
consideration, and how the cost to the consumer of making that change
might affect their acceptance of it. The agency maintains, as it has in
prior CAFE rulemakings, that there is an important distinction between
considerations of technological feasibility and economic
practicability. As explained above, a given level of performance may be
technologically feasible (i.e., setting aside economic constraints) for
a given vehicle model. However, it would not be economically
practicable to require a level of fleet average performance that
assumes every vehicle will in the first year of the standards perform
at the highest technologically feasible level, because manufacturers do
not have unlimited access to the financial resources or may not
practically be able to hire enough engineers, build enough facilities,
and install enough tooling.
NHTSA therefore believes, based on the information currently before
us, that economic practicability concerns render certain standards that
might otherwise be technologically feasible to be beyond maximum
feasible within the meaning of the statute for the 2017-2025 standards.
Our analysis indicated that technologies seem to exist to meet the
stringency levels required by future standards under nearly all of the
regulatory alternatives; but it also indicated that manufacturers would
not be able to apply those technologies quickly enough, given their
redesign cycles, and the level of the resources that would be required
to implement those technologies widely across their products, to meet
all applicable standards in every model year under some of the
alternatives.
Another consideration for economic practicability is incremental
per-vehicle increases in technology cost. In looking at the incremental
technology cost results from our modeling analysis, the agency saw that
in progressing from alternatives with lower stringencies to
alternatives with higher stringencies, technology cost increases
(perhaps predictably) at a progressively higher rate, until the model
projects that manufacturers are unable to comply with the increasing
standards and enter (or deepen) non-compliance. Table IV-25 and Table
IV-26 show estimated cumulative lifetime fuel savings and estimated
average vehicle cost increase for passenger cars and light trucks. The
results show that there is a significant increase in technology cost
between the 4% alternatives and the 5% alternatives.
BILLING CODE 4910-59-P
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[[Page 75247]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.200
BILLING CODE 4910-59-C
Thus, if technological feasibility and the need of the nation are
not particularly limiting in a given rulemaking, then maximum feasible
standards would be represented by the mpg levels that we could require
of the industry to improve fuel economy before we reach a tipping point
that presents risk of significantly adverse economic consequences.
Standards that are lower than that point would likely not be maximum
feasible, because such standards would leave fuel-saving technologies
on the table unnecessarily; standards that are higher than that point
would likely be beyond what the agency would consider economically
practicable, and therefore beyond what we would consider maximum
feasible, even if they might be technologically feasible or better meet
the need of the nation to conserve energy. The agency does not believe
that standards are balanced if they weight one or two factors so
heavily as to ignore another.
We explained above that part of the way that we try to evaluate
economic practicability is through a variety of model inputs, such as
phase-in caps (the annual rate at which manufacturers can increase the
percentage of their fleet that employ a particular type of fuel-saving
technology) and redesign schedules to account for needed lead time.
These inputs limit how much technology can be applied to a
manufacturer's fleet in the agency's analysis attempting to simulate a
way for the manufacturer to
[[Page 75248]]
comply with standards set under different regulatory alternatives. If
the limits (and technology cost-effectiveness) prevent enough
manufacturers from meeting the required levels of stringency, the
agency may decide that the standards under consideration may not be
economically practicable. The difference between the required fuel
economy level that applies to a manufacturer's fleet and the level of
fuel economy that the agency projects the manufacturer would achieve in
that year, based on our analysis, is called a ``compliance shortfall.''
\754\
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\754\ The agency's modeling estimates how the application of
technologies could increase vehicle costs, reduce fuel consumption,
and reduce CO2 emissions, and affect other factors. As
CAFE standards are performance-based, NHTSA does not mandate that
specific technologies be used for compliance. CAFE modeling,
therefore projects one way that manufacturers could comply.
Manufacturers may choose a different mix of technologies based on
their unique circumstances and products.
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We underscore again that the modeling analysis does not dictate the
``answer,'' it is merely one source of information among others that
aids the agency's balancing of the standards. These considerations,
shortfalls and increases in incremental technology costs, do not
entirely define economic practicability, but we believe they are
symptomatic of it. In looking at the projected compliance shortfall
results from our modeling analysis, the agency preliminarily concluded,
based on the information before us at the time, that for both passenger
car and for light trucks, the MNB and TC=TB alternatives, and the 5%,
6% and 7% alternatives did not appear to be economically practicable,
and were thus likely beyond maximum feasible levels for MYs 2017-2025.
In other words, despite the theoretical technological feasibility of
achieving these levels, various manufacturers would likely lack the
financial and engineering resources and sufficient lead time to do so.
The analysis showed that for the passenger car 5% alternative,
there were significant compliance shortfalls for Chrysler in MY 2025,
Ford in MYs 2021 and 2023-2025, GM in MYs 2022 and 2024-2025, Mazda in
MYs 2021 and 2024-2025, and Nissan in MY 2025. For light trucks, the
analysis showed the 5% alternative had significant compliance
shortfalls for Chrysler in MYs 2022-2025, Ford in MY 2025, GM in MYs
2023-2025, Kia in MY 2025, Mazda in MYs 2022 and 2025, and Nissan in
MYs 2023-2025. However, the 4%, 3% and 2% alternatives did not appear,
based on shortfalls, to be beyond the level of economic practicability,
and thus appeared potentially to be within the range of alternatives
that might yet be maximum feasible.
[GRAPHIC] [TIFF OMITTED] TP01DE11.201
[[Page 75249]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.202
The preliminary analysis referred to above, in which the agency
tentatively concluded that the 5%, 6%, 7%, MNB, and TC=TB alternatives
were likely beyond the level of economic practicability based on the
information available to the agency at the time, was conducted
following the first SNOI and prior to the second SNOI--thus, between
the end of 2010 and July 2011. The agencies stated in the first SNOI
that we had not conducted sufficient analysis at the time to narrow the
range of potential stringencies that had been discussed in the initial
NOI and in the Interim Joint TAR, and that we would be conducting more
analyses and continuing extensive dialogue with stakeholders in the
coming months to refine our proposal. Based on our initial
consideration of how the factors might be balanced to determine the
maximum feasible standards to propose for MYs 2017-2025 (i.e., where
technological feasibility did not appear to be particularly limiting
and the need of the nation would counsel for choosing more stringent
alternatives, but economic practicability posed significant
limitations), NHTSA's preliminary analysis indicated that the
alternatives including up to 4% per year for cars and 4% per year for
trucks should reasonably remain under consideration.
With that preliminary estimate of 4%/year for cars and trucks as
the upper end of the range of alternatives that should reasonably
remain under consideration for MYs 2017-2025, the agencies began
meeting again intensely with stakeholders, including many individual
manufacturers, between June 21, 2011 and July 27, 2011 to determine
whether additional information would aid NHTSA in further
consideration. Beginning in the June 21, 2011 meeting, NHTSA and EPA
presented the 4% alternative target curves as a potential concept along
with preliminary program flexibilities and provisions, in order to get
feedback from the manufacturer stakeholders. Manufacturer stakeholders
provided comments, much of which was confidential business information,
which included projections of how they might comply with concept
standards, the challenges that they expected, and their recommendations
on program stringency and provisions.\755\
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\755\ Feedback from these stakeholder meetings is summarized in
section IV.B and documents that are referenced in that section.
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Regarding passenger cars, several manufacturers shared projections
that they would be capable of meeting stringency levels similar to
NHTSA's preliminary CAFE modeling projections for the 4% alternative in
MY 2020 or in 2021, with some of those arguing that they faced
challenges in the earlier years of that period with meeting a constant
4% rate throughout the entire period. Some manufacturers shared
projections that they could comply with stringencies that ramped up,
increasing more slowly in MY 2017 and then progressively increasing
through MY 2021. Most manufacturers provided limited projections beyond
MY 2021, although some stated that they could meet the agency's concept
stringency targets in MY 2025. Manufacturers generally suggested that
the most significant challenges to meeting a constant 4% (or faster)
year-over-year increase in the passenger car standards related to their
ability to implement the
[[Page 75250]]
new technologies quickly enough to achieve the required levels, given
their need to implement fuel economy improvements in both the passenger
car and light truck fleets concurrently; challenges related to the
cadence of redesign and refresh schedules; the pace at which new
technology can be implemented considering economic factors such as
availability of engineering resources to develop and integrate the
technologies into products; and the pace at which capital costs can be
incurred to acquire and integrate the manufacturing and production
equipment necessary to increase the production volume of the
technologies. Manufacturers often expressed concern that the 4% levels
could require greater numbers of advanced technology vehicles than they
thought they would be able to sell in that time frame, given their
belief that the cost of some technologies was much higher than the
agencies had estimated and their observations of current consumer
acceptance of and willingness to pay for advanced technology vehicles
that are available now in the marketplace. A number of manufacturers
argued that they did not believe that they could create a sustainable
business case under passenger car standards that increased at the rate
required by the 4% alternative.
Regarding light trucks, most manufacturers expressed significantly
greater concerns over the 4% alternative for light trucks than for
passenger cars. Many manufacturers argued that increases in light truck
standard stringency should be slower than increases in passenger car
standard stringency, based on, among other things, the greater payload,
cargo capacity and towing utility requirements of light trucks, and
what they perceived to be lower consumer acceptance of certain (albeit
not all) advanced technologies on light trucks. Many manufacturers also
commented that redesign cycles are longer on trucks than they are on
passenger cars, which reduces the frequency at which significant
changes can be made cost-effectively to comply with increasing
standards, and that the significant increases in stringency in the MY
2012-2016 program \756\ in combination with redesign schedules would
not make it possible to comply with the 4% alternative in the earliest
years of the MY 2017-2025 program, such that only significantly lower
stringencies in those years would be feasible in their estimation. As
for cars, most manufacturers provided limited projections beyond MY
2021. Manufacturers generally stated that the most significant
challenges to meeting a constant 4% (or faster) year-over-year increase
in the light truck standards were similar to what they had described
for passenger cars as enumerated in the paragraph above, but were
compounded by concerns that applying technologies to meet the 4%
alternative standards would result in trucks that were more expensive
and provided less utility to consumers. As was the case for cars,
manufacturers argued that their technology cost estimates were higher
than the agencies' and consumers are less willing to accept/pay for
some advanced technologies in trucks, but manufacturers argued that
these concerns were more significant for trucks than for cars, and that
they were not optimistic that they could recoup the costs through
higher prices for vehicles with the technologies that would be needed
to comply with the 4% alternative. Given their concerns about having to
reduce utility and raise truck prices, and about their ability to apply
technologies quickly enough given the longer redesign periods for
trucks, a number of manufacturers argued that they did not believe that
they could create a sustainable business case under light truck
standards that increased at the rate required by the 4% alternative.
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\756\ Some manufacturers indicated that their light truck fleet
fuel economy would be below what they anticipated their required
fuel economy level would be in MY 2016, and that they currently
expect that they will need to employ available flexibilities to
comply with that standard.
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Other stakeholders, such as environmental and consumer groups,
consistently stated that stringent standards are technically achievable
and critical to important national interests, such as improving energy
independence, reducing climate change, and enabling the domestic
automobile industry to remain competitive in the global market. Labor
interests stressed the need to carefully consider economic impacts and
the opportunity to create and support new jobs, and consumer advocates
emphasized the economic and practical benefits to consumers of improved
fuel economy and the need to preserve consumer choice. In addition, a
number of stakeholders stated that the standards under development
should not have an adverse impact on safety.
NHTSA, in collaboration with EPA and in coordination with CARB,
carefully considered the inputs received from all stakeholders,
conducted additional independent analyses, and deliberated over the
feedback received on the agencies' analyses. NHTSA considered
individual manufacturers' redesign cycles and, where available, the
level of technologies planned for their future products that improve
fuel economy, as well as some estimation of the resources that would
likely be needed to support those plans and the potential future
standards. The agency also considered whether we agreed that there
could conceivably be compromises to vehicle utility depending on the
technologies chosen to meet the potential new standards, and whether a
change in the cadence of the rate at which standards increase could
provide additional opportunity for industry to develop and implement
technologies that would not adversely affect utility. NHTSA considered
feedback on consumer acceptance of some advanced technologies and
consumers' willingness to pay for improved fuel economy. In addition,
the agency carefully considered whether manufacturer assertions about
potential uncertainties in the agency's technical, economic, and
consumer acceptance assumptions and estimates were potentially valid,
and if so, what the potential effects of these uncertainties might be
on economic practicability.
Regarding passenger cars, after considering this feedback from
stakeholders, the agency considered further how it thought the factors
should be balanced to determine the maximum feasible passenger car
standards for MYs 2017-2025. Based on that reconsideration of the
information before the agency and how it informs our balancing of the
factors, NHTSA tentatively concludes that the points raised may
indicate that the agency's preliminary analysis supporting
consideration of standards that increased up to 4%/year may not have
captured fully the level of uncertainty that surrounds economic
practicability in these future model years. Nevertheless, while we
believe there may be some uncertainty, we do not agree that it is
nearly as significant as a number of manufacturers maintained,
especially for passenger cars. The most persuasive information received
from stakeholders for passenger cars concerned practicability issues in
the first phase of the MY 2017-2025 standards. We therefore tentatively
conclude that the maximum feasible stringency levels for passenger cars
are only slightly different from the 4%/year levels suggested as the
high end preliminarily considered by the agency; increasing on average
3.7%/year in MYs 2017-2021, and on average 4.5%/year in MYs 2022-2025.
For the overall MY 2017-2025 period, the maximum feasible stringency
curves increase on average at 4.1%/year, and our analysis
[[Page 75251]]
indicates that the costs and benefits attributable to the 4%
alternative and the preferred alternative for passenger cars are very
similar: The preferred alternative is 8.8 percent less expensive for
manufacturers than the 4% alternative (estimated total costs are $113
billion for the preferred alternative and $124 billion for the 4%
alternative), and achieves only $20 billion less in total benefits than
the 4% alternative (estimated total benefits are $310 billion for the
preferred alternative and $330 billion for the 4% alternative), a very
small difference given that benefits are spread across the entire
lifetimes of all vehicles subject to the standards. The analysis also
shows that the lifetime cumulative fuel savings is only 5 percent
higher for the 4% alternative than the preferred alternative (the
estimated fuel savings is 104 billion gallons for the preferred
alternative, and 110 billion gallons for the 4% alternative).
At the same time, the increase in average vehicle cost in MY 2025
is 9.4 percent higher for the 4% alternative (the estimated cost
increase for the average vehicle is $2,023 for the preferred
alternative, and $2,213 for the 4% alternative). The rates of increase
in stringency for each model year are summarized in Table IV-29. NHTSA
emphasizes that under 49 U.S.C. 32902(b), the standards must be maximum
feasible in each model year without reference to other model years, but
we believe that the small amount of progressiveness in the proposed
standards for MYs 2017-2021, which has very little effect on total
benefits attributable to the proposed passenger car standards, will
help to enable the continuation of, or increases in, research and
development into the more advanced technologies that will enable
greater stringency increases in MYs 2022-2025, and help to capture the
considerable fuel savings and environmental benefits similar to the 4%
alternative beginning in MY 2025.
We are concerned that requiring manufacturers to invest that
capital to meet higher standards in MYs 2017-2021, rather than allowing
them to increase fuel economy in those years slightly more slowly,
would reduce the levels that would be feasible in the second phase of
the program by diverting research and development resources to those
earlier model years. Thus, after considerable deliberation with EPA and
consultation with CARB, NHTSA selected the preferred alternative as the
maximum feasible alternative for MYs 2017-2025 passenger cars based on
consideration of inputs from manufacturers and the agency's independent
analysis, which reaches the stringency levels of the 4% alternative in
MY 2025, but has a slightly slower ramp up rate in the earlier years.
[[Page 75252]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.203
Regarding light trucks, while NHTSA does not agree with the
manufacturer's overall cost assessments and believe that our technology
cost and effectiveness assumptions should allow the most capable
manufacturers to preserve all necessary vehicle utility, the agencies
do believe there is merit to some of the concerns raised in stakeholder
feedback. Specifically, concerns about longer redesign schedules for
trucks, compounded by the need to invest simultaneously in raising
passenger car fuel economy, may not have been fully captured in our
preliminary analysis. This could lead manufacturers to implement
technologies that do not maintain vehicle utility, based on the cadence
of the standards under the 4% alternative. A number of manufacturers
repeatedly stated, in providing feedback, that the MYs 2012-2016
standards for trucks, while feasible, required significant investment
to reach the required levels, and that given the redesign schedule for
trucks, that level of investment throughout the entire MYs 2012-2025
time period was not sustainable. Based on the confidential business
information that manufacturers provided to us, we believe that this
point may be valid. If the agency pushes CAFE increases that require
considerable sustained investment at a faster rate than industry
redesign cycles, adverse economic
[[Page 75253]]
consequences could ensue. The best information that the agency has at
this time, therefore, indicates that requiring light truck fuel economy
improvements at the 4% annual rate could create potentially severe
economic consequences.
Thus, evaluating the inputs from stakeholders and the agency's
independent analysis, the agency also considered further how it thought
the factors should be balanced to determine the maximum feasible light
truck standards for MYs 2017-2025. Based on that consideration of the
information before the agency and how it informs our balancing of the
factors, NHTSA tentatively concludes that 4%/year CAFE stringency
increases for light trucks in MYs 2017-2021 are likely beyond maximum
feasible, and in fact, in the earliest model years of the MY 2017-2021
period, that the 3%/year and 2%/year alternatives for trucks are also
likely beyond maximum feasible. NHTSA therefore tentatively concludes
that the preferred alternative, which would in MYs 2017-2021 increase
on average 2.6%/year, and in MYs 2022-2025 would increase on average
4.6%/year, is the maximum feasible level that the industry can reach in
those model years. For the overall MY 2017-2025 period, the maximum
feasible stringency curves would increase on average 3.5%/year. The
rates of increase in stringency for each model year are summarized in
Table IV-29 and Table IV-30.
Our analysis indicates that the preferred alternative has 48
percent lower cost than the 4% alternative (estimated total costs are
$44 billion for the preferred alternative and $83 billion for the 4%
alternative), and the total benefits of the preferred alternative are
30 percent lower ($87 billion lower) than the 4% alternative (estimated
total benefits are $206 billion for the preferred alternative and $293
billion for the 4% alternative), spread across the entire lifetimes of
all vehicles subject to the standards. The analysis also shows that the
lifetime cumulative fuel savings is 42 percent higher for the 4%
alternative than the preferred alternative (the estimated fuel savings
is 69 billion gallons for the preferred alternative, and 98 billion
gallons for the 4% alternative). At the same time, the increase in
average vehicle cost in MY 2025 is 54 percent higher for the 4%
alternative (the estimated cost increase for the average vehicle is
$1,578 for the preferred alternative, and $2,423 for the 4%
alternative).
While these differences are larger than for passenger cars, NHTSA
believes that standards set at these levels for these model years will
help address concerns raised by manufacturer stakeholders and reduce
the risk for adverse economic consequences, while at the same time
ensuring most of the substantial improvements in fuel efficiency
initially envisioned over the entire period and supported by other
stakeholders. NHTSA believes that these stringency levels, along with
the provisions for incentives for advanced technologies to encourage
their development and implementation, and the agencies' expectation
that some of the uncertainties surrounding consumer acceptance of new
technologies in light trucks should have resolved themselves by that
time frame based on consumers' experience with the advanced
technologies, will enable these increases in stringency over the entire
MY 2017-2025 period. Although, as stated above, the light truck
standards must be maximum feasible in each model year without reference
to other model years, we believe that standards set at the stated
levels for MYs 2017-2021 and the incentives for advanced technologies
for pickup trucks will create the best opportunity to ensure that the
MY 2022-2025 standards are economically practicable, and avoid adverse
consequences. The first phase of light truck standards, in that
respect, acts as a kind of bridge to the second phase, in which
industry should be able to realize considerable additional improvements
in fuel economy.
The proposed standards also account for the effect of EPA's
standards, in light of the agencies' close coordination and the fact
that both sets of standards were developed together to harmonize as
part of the National Program. Given the close relationship between fuel
economy and CO2 emissions, and the efforts NHTSA and EPA
have made to conduct joint analysis and jointly deliberate on
information and tentative conclusions,\757\ the agencies have sought to
harmonize and align their proposed standards to the greatest extent
possible, consistent with their respective statutory authorities. In
comparing the proposed standards, the agencies' stringency curves are
equivalent, except for the fact that the stringency of EPA's proposed
passenger car standards reflect the ability to improve GHG emissions
through reductions in A/C system refrigerant leakage and the use of
lower GWP refrigerants (direct A/C improvements),\758\ and that EPA
provides incentives for PHEV, EV and FCV vehicles, which NHTSA does not
provide because statutory incentives have already been defined for
these technologies. The stringency of NHTSA's proposed standards for
passenger cars for MYs 2017-2025 align with the stringency of EPA's
equivalent standards when these differences are considered.\759\ NHTSA
is proposing the preferred alternative based on the tentative
determination of maximum feasibility as described earlier in the
section, but, based on efforts NHTSA and EPA have made to conduct joint
analysis and jointly deliberate on information and tentative
conclusions, NHTSA has also aligned the proposed CAFE standards with
EPA's proposed standards.
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\757\ NHTSA and EPA conducted joint analysis and jointly
deliberated on information and tentative conclusions related to
technology cost, effectiveness, manufacturers' capability to
implement technologies, the cadence at which manufacturers might
support the implementation of technologies, economic factors, and
the assessment of comments from manufacturers.
\758\ As these A/C system improvements do not influence fuel
economy, the stringency of NHTSA's preferred alternatives do not
reflect the availability of these technologies.
\759\ We note, however, that the alignment is based on the
assumption that manufacturers implement the same level of direct A/C
system improvements as EPA currently forecasts for those model
years, and on the assumption of PHEV, EV, and FCV penetration at
specific levels. If a manufacturer implements a higher level of
direct A/C improvement technology and/or a higher penetration of
PHEVs, EVs and FCVs, then NHTSA's proposed standards would
effectively be more stringent than EPA's. Conversely, if a
manufacturer implements a lower level of direct A/C improvement
technology and/or a lower penetration of PHEVs, EVs and FCVs, then
EPA's proposed standards would effectively be more stringent than
NHTSA's.
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Thus, consistent with President Obama's announcement on July 29,
2011, and with the August 9, 2011 SNOI, NHTSA has tentatively concluded
that the standards represented by the preferred alternative are the
maximum feasible standards for passenger cars and light trucks in MYs
2017-2025. We recognize that higher standards would help the need of
the nation to conserve more energy and might potentially be
technologically feasible (in the narrowest sense) during those model
years, but based on our analysis and the evidence presented by the
industry, we tentatively conclude that higher standards would not
represent the proper balancing for MYs 2017-2025 cars and trucks.\760\
We
[[Page 75254]]
tentatively conclude that the correct balancing recognizes economic
practicability concerns as discussed above, and sets standards at the
levels that the agency is proposing in this NPRM.\761\ In the same
vein, lower standards might be less burdensome on the industry, but
considering the environmental impacts of the different regulatory
alternatives as required under NEPA and the need of the nation to
conserve energy, we do not believe they would have represented the
appropriate balancing of the relevant factors, because they would have
left technology, fuel savings, and emissions reductions on the table
unnecessarily, and not contributed as much as possible to reducing our
nation's energy security and climate change concerns. Standards set at
the proposed levels for MYs 2017-2021 will provide the additional
benefit of helping to promote further research and development into the
more advanced fuel economy-improving technologies to provide a bridge
to more stringent standards in MYs 2022-2025, and enable significant
fuel savings and environmental benefits throughout the program, and
particularly substantial benefits in the later years of the program and
beyond. Additionally, consistent with Executive Order 13563, the agency
believes that the benefits of the preferred alternative amply justify
the costs; indeed, the monetized benefits exceed the monetized costs by
$358 billion over the lifetime of the vehicles covered by the proposed
standards. In full consideration of all of the information currently
before the agency, we have weighed the statutory factors carefully and
selected proposed passenger car and light truck standards that we
believe are the maximum feasible for MYs 2017-2025.
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\760\ We note, for example, that while Executive Orders 12866
and 13563 focus attention on an approach that maximizes net
benefits, both Executive Orders recognize that this focus is subject
to the requirements of the governing statute. In this rulemaking,
the standards represented by the ``MNB'' alternative are more
stringent than what NHTSA has tentatively concluded would be maximum
feasible for MYs 2017-2025, and thus setting standards at that level
would be inconsistent with the requirements of EPCA/EISA to set
maximum feasible standards.
\761\ We underscore that the agency's tentative decision
regarding what standards would be maximum feasible for MYs 2017-2025
is made with reference to the rulemaking time frame and
circumstances of this proposal. Each CAFE rulemaking (indeed, each
stage of any given CAFE rulemaking) presents the agency with new
information that may affect how we balance the relevant actors.
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G. Impacts of the Proposed CAFE Standards
1. How will these standards improve fuel economy and reduce GHG
emissions for MY 2017-2025 vehicles?
As discussed above, the CAFE level required under an attribute-
based standard depends on the mix of vehicles produced for sale in the
U.S. Based on the market forecast that NHTSA and EPA have used to
develop and analyze the proposed CAFE and CO2 emissions
standards, NHTSA estimates that the proposed new CAFE standards would
lead average required fuel consumption (fuel consumption is the inverse
of fuel economy) levels to increase by an average of 4.0 percent
annually through MY 2025, reaching a combined average fuel economy
requirement of 49.6 mpg in that model year:
[GRAPHIC] [TIFF OMITTED] TP01DE11.204
[[Page 75255]]
Accounting for differences between fuel economy levels under
laboratory conditions, NHTSA estimates that these requirements would
translate into the following required average levels under real-world
operating conditions:
[GRAPHIC] [TIFF OMITTED] TP01DE11.205
If manufacturers apply technology only as far as necessary to
comply with CAFE standards, NHTSA estimates that, setting aside factors
the agency cannot consider for purposes of determining maximum feasible
CAFE standards,\762\ average achieved fuel economy levels would
correspondingly increase through MY 2025, but that manufacturers would,
on average, under-comply \763\ in some model years and over-comply
\764\ in others, reaching a combined average fuel economy of 47.4 mpg
(taking into account estimated adjustments reflecting improved air
conditioner efficiency) in MY 2025:
---------------------------------------------------------------------------
\762\ 49 U.S.C. 32902(h) states that NHTSA may not consider the
fuel economy of dedicated alternative fuel vehicles, the
alternative-fuel portion of dual-fueled automobile fuel economy, or
the ability of manufacturers to earn and use credits for over-
compliance, in determining the maximum feasible stringency of CAFE
standards.
\763\ ``Under-compliance'' with CAFE standards can be mitigated
either through use of FFV credits, use of existing or ``banked''
credits, or through fine payment. Although, as mentioned above,
NHTSA cannot consider availability of statutorily-provided credits
in setting standards, NHTSA is not prohibited from considering fine
payment. Therefore, the estimated achieved CAFE levels presented
here include the assumption that Aston Martin, BMW, Daimler (i.e.,
Mercedes), Geely (i.e., Volvo), Lotus, Porsche, Spyker (i.e., Saab),
and, Tata (i.e., Jaguar and Rover), and Volkswagen will only apply
technology up to the point that it would be less expensive to pay
civil penalties.
\764\ In NHTSA's analysis, ``over-compliance'' occurs through
multi-year planning: manufacturers apply some ``extra'' technology
in early model years (e.g., MY 2014) in order to carry that
technology forward and thereby facilitate compliance in later model
years (e.g., MY 2016).
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[[Page 75256]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.206
Accounting for differences between fuel economy levels under
laboratory conditions, NHTSA estimates that these requirements would
translate into the following required average levels under real-world
operating conditions:
[[Page 75257]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.207
Setting aside the potential to produce additional EVs (or, prior to
MY 2020, PHEVs) or take advantage of EPCA's provisions regarding CAFE
credits, NHTSA estimates that today's proposed standards could increase
achieved fuel economy levels by average amounts of up to 0.5 mpg during
the few model years leading into MY 2017, as manufacturers apply
technology during redesigns leading into model years covered by today's
new standards.\765\ As shown below, these ``early'' fuel economy
increases yield corresponding reductions in fuel consumption and
greenhouse gas emissions, and incur corresponding increases in
technology outlays.
---------------------------------------------------------------------------
\765\ This outcome is a direct result of revisions, made to
DOT's CAFE model in preparation for the MY 2012-2016 rule, to
simulate ``multiyear planning'' effects--that is, the potential that
manufacturers will apply ``extra'' technology in one model year if
doing so will be sufficiently advantageous with respect to the
ability to comply with CAFE standards in later model years. For
example, for today's rulemaking analysis, NHTSA has estimated that
Ford will redesign the F-150 pickup truck in MY 2015, and again in
MY 2021. As explained in Chapter V of the PRIA, NHTSA expects that
many technologies would be applied as part of a vehicle redesign.
Therefore, in NHTSA's analysis, if Ford does not anticipate ensuing
standards when redesigning the MY 2015 F-150, Ford may find it more
difficult to comply with light truck standard during MY 2016-2020.
Through simulation of multiyear planning effects, NHTSA's analysis
indicates that Ford could apply more technology to the MY 2015 F-150
if standards continue to increase after MY 2016 than Ford need apply
if standards remain unchanged after MY 2016, and that this
additional technology would yield further fuel economy improvements
of up to 1.3 mpg, depending on pickup configuration.
---------------------------------------------------------------------------
Within the context EPCA requires NHTSA to apply for purposes of
determining maximum feasible stringency of CAFE standards (i.e.,
setting aside EVs, pre-MY 2020 PHEVs, and all statutory CAFE credit
provisions), NHTSA estimates that these fuel economy increases would
lead to fuel savings totaling 173 billion gallons during the useful
lives of vehicles manufactured in MYs 2017-2025 and the few MYs
preceding MY 2017:
[[Page 75258]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.208
The agency also estimates that these new CAFE standards would lead
to corresponding reductions of CO2 emissions totaling 1,834
million metric tons (mmt) during the useful lives of vehicles sold in
MYs 2017-2025 and the few MYs preceding MY 2017:
[GRAPHIC] [TIFF OMITTED] TP01DE11.209
2. How will these standards improve fleet-wide fuel economy and reduce
GHG emissions beyond MY 2025?
Under the assumption that CAFE standards at least as stringent as
those being proposed today for MY 2025 would be established for
subsequent model years, the effects of the proposed standards on fuel
consumption and GHG emissions will continue to increase for many years.
This will occur because over time, a growing fraction of the U.S.
light-duty vehicle fleet will be comprised of cars and light trucks
that meet at least the MY 2025 standard. The impact of the new
standards on fuel use and GHG emissions would therefore continue to
grow through approximately 2060, when virtually all cars and light
trucks in service will have met standards as stringent as those
established for MY 2025.
As Table IV-41 shows, NHTSA estimates that the fuel economy
increases resulting from the proposed standards will lead to reductions
in total fuel consumption by cars and light trucks of 3 billion gallons
during 2020, increasing to 40 billion gallons by 2060. Over the period
from 2017, when the proposed standards would begin to take effect,
through 2050, cumulative fuel savings would total 1,232 billion
gallons, as Table IV-41 also indicates.
[[Page 75259]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.210
The energy security analysis conducted for this rule estimates that
the world price of oil will fall modestly in response to lower U.S.
demand for refined fuel. One potential result of this decline in the
world price of oil would be an increase in the consumption of petroleum
products outside the U.S., which would in turn lead to a modest
increase in emissions of greenhouse gases, criteria air pollutants, and
airborne toxics from their refining and use. While additional
information would be needed to analyze this ``leakage effect'' in
detail, NHTSA provides a sample estimate of its potential magnitude in
its Draft EIS. This analysis indicates that the leakage effect is
likely to offset only a very small fraction of the reductions in fuel
use and emissions projected to result from the rule.
As a consequence of these reductions in fleet-wide fuel
consumption, the agency also estimates that the new CAFE standards for
MYs 2017-2025 would lead to corresponding reductions in CO2
emissions from the U.S. light-duty vehicle fleet. Specifically, NHTSA
estimates that total annual CO2 emissions associated with
passenger car and light truck use in the U.S. use would decline by 32
million metric tons (mmt) in 2020 as a consequence of the new CAFE
standards, as Table IV-42 reports. The table also shows that this
annual reduction is estimated to grow to nearly 488 million metric tons
by the year 2060, and will total over 13 billion metric tons over the
period from 2017, when the proposed standards would take effect,
through 2060.
[GRAPHIC] [TIFF OMITTED] TP01DE11.211
These reductions in fleet-wide CO2 emissions, together
with corresponding reductions in other GHG emissions from fuel
production and use, would lead to small but significant reductions in
projected changes in the future global climate. These changes, based on
analysis documented in the draft Environmental Impact Statement (EIS)
that informed the agency's decisions regarding this proposal, are
summarized in Table IV-43 below.
[[Page 75260]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.212
3. How will these proposed standards impact non-GHG emissions and their
associated effects?
Under the assumption that CAFE standards at least as stringent as
those proposed for MY 2025 would be established for subsequent model
years, the effects of the new standards on air quality and its
associated health effects will continue to be felt over the foreseeable
future. This will occur because over time a growing fraction of the
U.S. light-duty vehicle fleet will be comprised of cars and light
trucks that meet the MY 2025 standard, and this growth will continue
until approximately 2060.
Increases in the fuel economy of light-duty vehicles required by
the new CAFE standards will cause a slight increase in the number of
miles they are driven, through the fuel economy ``rebound effect.'' In
turn, this increase in vehicle use will lead to increases in emissions
of criteria air pollutants and some airborne toxics, since these are
products of the number of miles vehicles are driven.
At the same time, however, the projected reductions in fuel
production and use reported in Table IV-40 and IV-41 above will lead to
corresponding reductions in emissions of these pollutants that occur
during fuel production and distribution (``upstream'' emissions). For
most of these pollutants, the reduction in upstream emissions resulting
from lower fuel production and distribution will outweigh the increase
in emissions from vehicle use, resulting in a net decline in their
total emissions.\766\
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\766\ As stated elsewhere, while the agency's analysis assumes
that all changes in upstream emissions result from a decrease in
petroleum production and transport, the analysis of non-GHG
emissions in future calendar years also assumes that retail gasoline
composition is unaffected by this rule; as a result, the impacts of
this rule on downstream non-GHG emissions (more specifically, on air
toxics) may be underestimated. See also Section III.G above for more
information.
---------------------------------------------------------------------------
Tables IV-44 and IV-45 report estimated reductions in emissions of
selected criteria air pollutants (or their chemical precursors) and
airborne toxics expected to result from the proposed standards during
calendar year 2040. By that date, cars and light trucks meeting the MY
2025 CAFE standards will account for the majority of light-duty vehicle
use, so these reductions provide a useful index of the long-term impact
of the final standards on air pollution and its consequences for human
health. In the tables below, positive values indicate increases in
emissions, while negative values indicate reductions.
[[Page 75261]]
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[[Page 75262]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.214
In turn, the reductions in emissions reported in Tables IV-44 and
IV-45 are projected to result in significant declines in the adverse
health effects that result from population exposure to these
pollutants. Table IV-46 reports the estimated reductions in selected
PM2.5-related human health impacts that are expected to
result from reduced population exposure to unhealthful atmospheric
concentrations of PM2.5. The estimates reported in Table IV-
46, based on analysis documented in the draft Environmental Impact
Statement (EIS) that informed the agency's decisions regarding this
proposed rule, are derived from PM2.5-related dollar-per-ton
estimates that reflect the quantifiable reductions in health impacts
likely to result from reduced population exposure to particular matter
(PM2.5). They do not include all health impacts related to
reduced exposure to PM, nor do they include any reductions in health
impacts resulting from lower population exposure to other criteria air
pollutants (particularly ozone) and air toxics.
There may be localized air quality and health impacts associated
with this rulemaking that are not reflected in the estimates of
aggregate air quality changes and health impacts reported in this
analysis. Emissions changes and dollar-per-ton estimates alone are not
necessarily a good indication of local or regional air quality and
health impacts, because the atmospheric chemistry governing formation
and accumulation of ambient concentrations of PM2.5, ozone,
and air toxics is very complex. Full-scale photochemical modeling would
provide the necessary spatial and temporal detail to more completely
and accurately estimate the changes in ambient levels of these
pollutants and their associated health and welfare impacts. NHTSA
intends to conduct such modeling for purposes of the final rule, but it
was not available in time to inform these proposed standards or to be
included in the Draft EIS.
[[Page 75263]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.215
4. What are the estimated costs and benefits of these proposed
standards?
NHTSA estimates that the proposed standards could entail
significant additional technology beyond the levels that could be
applied under baseline CAFE standards (i.e., the application of MY 2016
CAFE standards to MYs 2017-2025). This additional technology will lead
to increases in costs to manufacturers and vehicle buyers, as well as
fuel savings to vehicle buyers. Also, as discussed above, NHTSA
estimates that today's proposed standards could induce manufacturers to
apply technology during redesigns leading into model years covered by
today's new standards, and to incur corresponding increases in
technology outlays.
Technology costs are assumed to change over time due to the
influence of cost learning and the conversion from short- to long-term
ICMs. Table I-47 represents the CAFE model inputs for MY 2012, MY 2017,
MY 2021 and MY 2025 approximate net (accumulated) technology costs for
some of the key enabling technologies as applied to Midsize passenger
cars.\768\ Additional details on technology cost estimates can be found
in Chapter V of NHTSA's PRIA and Chapter 3 of the Joint Draft TSD.
---------------------------------------------------------------------------
\768\ The net (accumulated) technology costs represent the costs
from a baseline vehicle (i.e. the top of the decision tree) to each
of the technologies listed in the table. The baseline vehicle is
assumed to utilize a fixed-valve naturally aspirated inline 4
cylinder engine, 5-speed transmission and no electrification/
hybridization improvements.
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[[Page 75264]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.216
In order to pay for this additional technology (and, for some
manufacturers, civil penalties), NHTSA estimates that the cost of an
average passenger car and light truck will increase relative to levels
resulting from compliance with baseline (MY 2016) standards by $228-
$2,023 and $44-$1,578, respectively, during MYs 2017-2025. The
following tables summarize the agency's estimates of average cost
increases for each manufacturer's passenger car, light truck, and
overall fleets (with corresponding averages for the industry):
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These cost estimates reflect the potential that a given
manufacturer's efforts to minimize overall regulatory costs could focus
technology where the most fuel can be saved at the least cost, and not
necessarily, for example, where the cost to add technology would be
smallest relative to baseline production costs. Therefore, if average
incremental vehicle cost increases (including any civil penalties) are
measured as increases relative to baseline prices (estimated by adding
baseline costs to MY 2008 prices), the agency's analysis shows relative
cost increases declining as baseline vehicle price increases. Figure
IV-3 shows the trend for MY 2025, for vehicles with estimated baseline
prices up to $100,000:
[[Page 75271]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.223
If manufacturers pass along these costs rather than reducing
profits, and pass these costs along where they are incurred rather than
``cross-subsidizing'' among products, the quantity of vehicles produced
at different price levels would change. Shifts in production may
potentially occur, which could create marketing challenges for
manufacturers that are active in certain segments. We recognize,
however, that many manufacturers do in fact cross-subsidize to some
extent, and take losses on some vehicles while continuing to make
profits from others. NHTSA has no evidence to indicate that
manufacturers will inevitably shift production plans in response to
these proposed standards, but nevertheless believes that this issue is
worth monitoring in the market going forward. NHTSA seeks comment on
potential market effects related to this issue.
As mentioned above, these estimated costs derive primarily from the
additional application of technology under the proposed standards. The
following three tables summarize the incremental extent to which the
agency estimates technologies could be added to the passenger car,
light truck, and overall fleets in each model year in response to the
proposed standards. Percentages reflect the technology's additional
application in the market, relative to the estimated application under
baseline standards (i.e., application of MY 2016 standards through MY
2025), and are negative in cases where one technology is superseded
(i.e., displaced) by another. For example, the agency estimates that
manufacturers could apply many improvements to transmissions (e.g.,
dual clutch transmissions, denoted below by ``DCT'') through MY 2025
under baseline standards. However, the agency also estimates that
manufacturers could apply even more advanced high efficiency
transmissions (denoted below by ``HETRANS'') under the proposed
standards, and that these transmissions would supersede DCTs and other
transmission advances. Therefore, as shown in the following three
tables, the incremental application of DCTs under the proposed
standards is negative.
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[[Page 75273]]
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[[Page 75279]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.231
Based on the agencies' estimates of manufacturers' future sales
volumes, and taking into account early outlays attributable to
multiyear planning effects (discussed above), the cost increases
associated with this additional application of technology will lead to
a total of nearly $157 billion in incremental outlays during MYs 2017-
2025 (and model years leading up to MY 2017) for additional technology
attributable to the proposed standards:
BILLING CODE 4910-59-P
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[[Page 75281]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.233
[[Page 75282]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.234
NHTSA notes that these estimates of the economic costs for meeting
higher CAFE standards omit certain potentially important categories of
costs, and may also reflect underestimation (or possibly
overestimation) of some costs that are included. For example, although
the agency's analysis is intended--with very limited exceptions\769\--
to hold vehicle performance, capacity, and utility constant when
applying fuel-saving technologies to vehicles, the analysis imputes no
cost to any actual reductions in vehicle performance, capacity, and
utility that may result from manufacturers' efforts to comply with the
proposed CAFE standards. Although these costs are difficult to estimate
accurately, they nonetheless represent a notable category of omitted
costs if they have not been adequately accounted for in the cost
estimates. Similarly, the agency's estimates of net benefits for
meeting higher CAFE standards includes estimates of the economic value
of potential changes in motor vehicle fatalities that could result from
reductions in the size or weight of vehicles, but not of changes in
non-fatal injuries that could result from reductions in vehicle size
and/or weight.
---------------------------------------------------------------------------
\769\ For example, the agencies have assumed no cost changes due
to our assumption that HEV towing capability is not maintained; due
to potential drivability issues with the P2 HEV; and due to
potential drivability and NVH issues with the shift optimizer.
---------------------------------------------------------------------------
Finally, while NHTSA is confident that the cost estimates are the
best available and appropriate for purposes of this proposed rule, it
is possible that the agency may have underestimated or overestimated
manufacturers' direct costs for applying some fuel economy
technologies, or the increases in manufacturer's indirect costs
associated with higher vehicle manufacturing costs. In either case, the
technology outlays reported here will not correctly represent the costs
of meeting higher CAFE standards. Similarly, NHTSA's estimates of
increased costs of congestion, accidents, and noise associated with
added vehicle use are drawn from a 1997 study, and the correct
magnitude of these values may have changed since they were developed.
If this is the case, the costs of increased vehicle use associated with
the fuel economy rebound effect will differ from the agency's estimates
in this analysis. Thus, like the agency's estimates of economic
benefits, estimates of total compliance costs reported here may
underestimate or overestimate the true economic costs of the proposed
standards.
However, offsetting these costs, the achieved increases in fuel
economy will also produce significant benefits to society. Most of
these benefits are attributable to reductions in fuel consumption; fuel
savings are valued using forecasts of pretax prices in EIA's reference
case forecast from AEO 2011. The total benefits also include other
benefits and dis-benefits, examples of which include the social values
of reductions in CO2 and criteria pollutant emissions, the
value of additional travel (induced by the rebound effect), and the
social costs of additional congestion, accidents, and noise
attributable to that additional travel. The PRIA accompanying today's
proposed rule presents a detailed analysis of the rule's specific
benefits.
As Tables IV-59 and 60 show, NHTSA estimates that at the discount
rates of 3 percent prescribed in OMB guidance for regulatory analysis,
the present value of total benefits from the proposed CAFE standards
over the lifetimes of MY 2017-2025 (and, accounting for multiyear
planning effects discussed above, model years leading up to MY 2017)
passenger cars and light trucks will be $515 billion.
[[Page 75283]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.235
Tables IV-61 and 62 report that the present value of total benefits
from requiring cars and light trucks to achieve the fuel economy levels
specified in the proposed CAFE standards for MYs 2017-25 will be $419
billion when discounted at the 7 percent rate also required by OMB
guidance. Thus the present value of fuel savings and other benefits
over the lifetimes of the vehicles covered by the proposed standards is
$96 billion--or about 19 percent--lower when discounted at a 7 percent
annual rate than when discounted using the 3 percent annual rate.\771\
---------------------------------------------------------------------------
\770\ Unless otherwise indicated, all tables in Section IV
report benefits calculated using the Reference Case input
assumptions, with future benefits resulting from reductions in
carbon dioxide emissions discounted at the 3 percent rate prescribed
in the interagency guidance on the social cost of carbon.
\771\ For tables that report total or net benefits using a 7
percent discount rate, future benefits from reducing carbon dioxide
emissions are discounted at 3 percent in order to maintain
consistency with the discount rate used to develop the reference
case estimate of the social cost of carbon. All other future
benefits reported in these tables are discounted using the 7 percent
rate.
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[[Page 75284]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.236
For both the passenger car and light truck fleets, NHTSA estimates
that the benefits of today's proposed standards will exceed the
corresponding costs in every model year, so that the net social
benefits from requiring higher fuel economy--the difference between the
total benefits that result from higher fuel economy and the technology
outlays required to achieve it--will be substantial. Because the
technology outlays required to achieve the fuel economy levels required
by the proposed standards are incurred during the model years when the
vehicles are produced and sold, however, they are not subject to
discounting, so that their present value does not depend on the
discount rate used. Thus the net benefits of the proposed standards
differ depending on whether the 3 percent or 7 percent discount rate is
used, but only because the choice of discount rates affects the present
value of total benefits, and not that of technology costs.
As Tables IV-63 and 64 show, over the lifetimes of the affected (MY
2017-2025, and MYs leading up to MY 2017) vehicles, the agency
estimates that when the benefits of the proposed standards are
discounted at a 3 percent rate, they will exceed the costs of the
proposed standards by $358 billion:
[[Page 75285]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.237
As indicated previously, when fuel savings and other future
benefits resulting from the proposed standards are discounted at the 7
percent rate prescribed in OMB guidance, they are $96 billion lower
than when the 3 percent discount rate is applied. Because technology
costs are not subject to discounting, using the higher 7 percent
discount rate reduces net benefits by exactly this same amount.
Nevertheless, Tables IV-65 and 66 show that the net benefits from
requiring passenger cars and light trucks to achieve higher fuel
economy are still substantial even when future benefits are discounted
at the higher rate, totaling $262 billion over MYs 2017-25. Net
benefits are thus about 27 percent lower when future benefits are
discounted at a 7 percent annual rate than at a 3 percent rate.
[[Page 75286]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.238
NHTSA's estimates of economic benefits from establishing higher
CAFE standards are subject to considerable uncertainty. Most important,
the agency's estimates of the fuel savings likely to result from
adopting higher CAFE standards depend critically on the accuracy of the
estimated fuel economy levels that will be achieved under both the
baseline scenario, which assumes that manufacturers will continue to
comply with the MY 2016 CAFE standards, and under alternative increases
in the standards that apply to MYs 2017-25 passenger cars and light
trucks. Specifically, if the agency has underestimated the fuel economy
levels that manufacturers would have achieved under the baseline
scenario--or is too optimistic about the fuel economy levels that
manufacturers will actually achieve under the proposed standards--its
estimates of fuel savings and the resulting economic benefits
attributable to this rule will be too large.
Another major source of potential overestimation in the agency's
estimates of benefits from requiring higher fuel economy stems from its
reliance on the Reference Case fuel price forecasts reported in AEO
2011. Although NHTSA believes that these forecasts are the most
reliable that are available, they are nevertheless significantly higher
than the fuel price projections reported in most previous editions of
EIA's Annual Energy Outlook, and reflect projections of world oil
prices that are well above forecasts issued by other firms and
government agencies. If the future fuel prices projected in AEO 2011
prove to be too high, the agency's estimates of the value of future
fuel savings--the major component of benefits from this rule--will also
be too high.
However, it is also possible that NHTSA's estimates of economic
benefits from establishing higher CAFE standards underestimate the true
economic benefits of the fuel savings those standards would produce. If
the AEO 2011 forecast of fuel prices proves to be too low, for example,
NHTSA will have underestimated the value of fuel savings that will
result from adopting higher CAFE standards for MY 2017-25. As another
example, the agency's estimate of benefits from reducing the threat of
economic damages from disruptions in the supply of imported petroleum
to the U.S. applies to calendar year 2020. If the magnitude of this
estimate would be expected to grow after 2015 in response to increases
in U.S. petroleum imports, growth in the level of U.S. economic
activity, or increases in the likelihood of disruptions in the supply
of imported petroleum, the agency may have underestimated the benefits
from the reduction in petroleum imports expected to result from
adopting higher CAFE standards.
NHTSA's benefit estimates could also be too low because they
exclude or understate the economic value of certain potentially
significant categories of benefits from reducing fuel consumption. As
one example, EPA's estimates of the economic value of reduced damages
to human health resulting from lower exposure to criteria air
pollutants includes only the effects
[[Page 75287]]
of reducing population exposure to PM2.5 emissions. Although
this is likely to be the most significant component of health benefits
from reduced emissions of criteria air pollutants, it excludes the
value of reduced damages to human health and other impacts resulting
from lower emissions and reduced population exposure to other criteria
air pollutants, including ozone and nitrous oxide (N2O), as
well as to airborne toxics. EPA's estimates exclude these benefits
because no reliable dollar-per-ton estimates of the health impacts of
criteria pollutants other than PM2.5 or of the health
impacts of airborne toxics were available to use in developing
estimates of these benefits.
Similarly, the agency's estimate of the value of reduced climate-
related economic damages from lower emissions of GHGs excludes many
sources of potential benefits from reducing the pace and extent of
global climate change.\772\ For example, none of the three models used
to value climate-related economic damages includes those resulting from
ocean acidification or loss of species and wildlife. The models also
may not adequately capture certain other impacts, including potentially
abrupt changes in climate associated with thresholds that govern
climate system responses, interregional interactions such as global
security impacts of extreme warming, or limited near-term
substitutability between damage to natural systems and increased
consumption. Including monetized estimates of benefits from reducing
the extent of climate change and these associated impacts would
increase the agency's estimates of benefits from adopting higher CAFE
standards.
---------------------------------------------------------------------------
\772\ Social Cost of Carbon for Regulatory Impact Analysis Under
Executive Order 12866, Interagency Working Group on Social Cost of
Carbon, United States Government, February 2010. Available in Docket
No. NHTSA-2009-0059.
---------------------------------------------------------------------------
The following tables present itemized costs and benefits for the
combined passenger car and light truck fleets for each model year
affected by the proposed standards and for all model years combined,
using both discount rates prescribed by OMB regulatory guidance. Tables
IV-67 and 68 report technology outlays, each separate component of
benefits (including costs associated with additional driving due to the
rebound effect, labeled ``dis-benefits''), the total value of benefits,
and net benefits using the 3 percent discount rate. (Numbers in
parentheses represent negative values.)
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Similarly, Tables IV-69 and 70 below report technology outlays, the
individual components of benefits (including ``dis-benefits'' resulting
from additional driving) and their total and net benefits using the 7
percent discount rate. (Again, numbers in parentheses represent
negative values.)
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[GRAPHIC] [TIFF OMITTED] TP01DE11.243
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\774\ Using the central value of $22 per metric ton for the SCC,
and discounting future benefits from reduced CO2
emissions at a 3 percent annual rate. Additionally, we note that the
$22 per metric ton value for the SCC applies to calendar year 2010,
and increases over time. See the interagency guidance on SCC for
more information.
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[[Page 75293]]
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[[Page 75295]]
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BILLING CODE 4910-59-C
These benefit and cost estimates do not reflect the availability
and use of certain flexibility mechanisms, such as compliance credits
and credit trading, because EPCA prohibits NHTSA from considering the
effects of those mechanisms in setting CAFE standards. However, the
agency notes that, in reality, manufacturers are likely to rely to some
extent on flexibility mechanisms and would thereby reduce the cost of
complying with the proposed standards to a meaningful extent.
As discussed in the PRIA, NHTSA has performed an analysis to
estimate costs and benefits taking into account EPCA's provisions
regarding EVs, PHEVs produced before MY 2020, FFV credits, and other
CAFE credit provisions. Accounting for these provisions indicates that
achieved fuel economies would be 0.5-1.6 mpg lower than when these
provisions are not considered:
[[Page 75296]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.247
As a result, NHTSA estimates that, when EPCA AFV and credit
provisions are taken into account, fuel savings will total 163 billion
gallons--5.8 percent less than the 173 billion gallons estimated when
these flexibilities are not considered:
[[Page 75297]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.248
The agency similarly estimates CO2 emissions reductions
will total 1,742 million metric tons (mmt), 5.0 percent less than the
1,834 mmt estimated when these EPCA provisions are not considered:
\775\
---------------------------------------------------------------------------
\775\ Differences in the application of diesel engines and plug-
in hybrid electric vehicles lead to differences in the percentage
changes in fuel consumption and carbon dioxide emissions between the
with- and without-credit cases.
---------------------------------------------------------------------------
[[Page 75298]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.249
This analysis further indicates that significant reductions in
outlays for additional technology will result when EPCA's AFV and
credit provisions are taken into account. Tables IV-77 and 78 below
show that, total technology costs are estimated to decline to $133
billion as a result of manufacturers' use of these provisions, or about
15 percent less than the $157 billion estimated when excluding these
flexibilities:
[[Page 75299]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.250
Because NHTSA's analysis indicated that these EPCA provisions will
modestly reduce fuel savings and related benefits, the agency's
estimate of the present value of total benefits will be $488 billion
when discounted at a 3 percent annual rate, as Tables IV-79 and 80
below report. This estimate of total benefits is $27 billion, or 5.2
percent, lower than the $515 billion reported previously for the
analysis that excluded these provisions:
[[Page 75300]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.251
Similarly, NHTSA estimates that the present value of total benefits
will decline modestly from its previous estimate when future fuel
savings and other benefits are discounted at the higher 7 percent rate.
Tables IV-81 and 82 report that the present value of benefits from
requiring higher fuel economy for MY 2017-25 cars and light trucks will
total $397 billion when discounted using a 7 percent rate, about $22
billion (5.3 percent) below the previous $419.2 billion estimate of
total benefits when FFV credits were not permitted:
[[Page 75301]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.252
Although the discounted present value of total benefits will be
modestly lower when EPCA AFV and credit provisions are taken into
account, the agency estimates that these provisions will reduce net
benefits by a smaller proportion. As Tables IV-83 and 84 show, the
agency estimates that these will reduce net benefits from the proposed
CAFE standards to $355 billion from the previously-reported estimate of
$358 billion without those credits, or by only about 1 percent.
[[Page 75302]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.253
Similarly, Tables IV-85 and 86 immediately below show that NHTSA
estimates manufacturers' use of EPCA AFV and credit provisions will
increase net benefits from requiring higher fuel economy for MY 2017-25
cars and light trucks, but very slightly--to $264 billion--if a 7
percent discount rate is applied to future benefits. This estimate is
$2 billion--or 0.8 percent--higher than the previously-reported $262
billion estimate of net benefits without the availability of EPCA AFV
and credit provisions using that same discount rate.
[[Page 75303]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.254
The agency has performed several sensitivity analyses to examine
important assumptions. All sensitivity analyses were based on the
``standard setting'' output of the CAFE model. We examine sensitivity
with respect to the following economic parameters:
(1) The price of gasoline: The main analysis (i.e., the Reference
Case) uses the AEO 2011 Reference Case estimate for the price of
gasoline. In this sensitivity analysis we examine the effect of using
the AEO 2011 High Price Case or Low Price Case forecast estimates
instead.
(2) The rebound effect: The main analysis uses a rebound effect of
10 percent to project increased miles traveled as the cost per mile
driven decreases. In the sensitivity analysis, we examine the effect of
using a 5, 15, or 20 percent rebound effect instead.
(3) The value of CO2 benefits: The main analysis uses
$22 per ton discounted at a 3 percent discount rate to quantify the
benefits of reducing CO2 emissions and $0.174 per gallon to
quantify the benefits of reducing fuel consumption. In the sensitivity
analysis, we examine the following values and discount rates applied
only to the social cost of carbon to value carbon benefits, considering
low, high, and very high valuations of approximately $5, $36, and $67
per ton, respectively with regard to the benefits of reducing
CO2 emissions.\776\ These are the 2010 values, which
increase over time. These values can be translated into cents per
gallon by multiplying by 0.0089,\777\ giving the following values:
---------------------------------------------------------------------------
\776\ The low, high, and very high valuations of $5, $36, and
$67 are rounded for brevity; the exact values are $4.86, $36.13, and
$66.88, respectively. While the model uses the unrounded values, the
use of unrounded values is not intended to imply that the chosen
values are precisely accurate to the nearest cent; rather, they are
average levels resulting from the many published studies on the
topic.
\777\ The molecular weight of Carbon (C) is 12, the molecular
weight of Oxygen (O) is 16, thus the molecular weight of
CO2 is 44. 1 gallon of gas weighs 2,819 grams, of that
2,433 grams are carbon. One ton of CO2/One ton of C (44/
12)* 2433grams C/gallon *1 ton/1000kg * 1 kg/1000g = (44 *
2433*1*1)/(12*1*1000 * 1000) = 0.0089. Thus, one ton of
CO2*0.0089 = 1 gallon of gasoline.
---------------------------------------------------------------------------
($4.86 per ton CO2) x 0.0089 = $0.043 per
gallon discounted at 5%
($22.00 per ton CO2) x 0.0089 = $0.196 per
gallon discounted at 3% (used in the main analysis)
($36.13 per ton CO2) x0.0089 = $0.322 per
gallon discounted at 2.5%
And a 95th percentile estimate of
($66.88 per ton CO2) x 0.0089 = $0.595 per
gallon discounted at 3%
(4) Military security: The main analysis does not assign a value to
the military security benefits of reducing fuel consumption. In the
sensitivity analysis, we examine the impact of using a value of 12
cents per gallon instead.
(5) Consumer Benefit: The main analysis assumes there is no loss in
value to consumers resulting from vehicles that have an increase in
price and higher fuel economy. This sensitivity analysis assumes that
there is a 25, or 50 percent loss in value to consumers--equivalent to
the assumption that consumers will only value the calculated benefits
they will achieve at 75, or 50 percent,
[[Page 75304]]
respectively, of the main analysis estimates.
(6) Battery cost: The agency conducted a sensitivity analysis of
technology cost in relation to battery costs for HEV, PHEV, and EV
batteries. The ranges are based on recommendations from technical
experts in the field of battery energy storage technologies at the
Department of Energy (DOE) and at Argonne National Laboratories (ANL),
and were developed using the Battery Performance and Cost (BatPac)
model developed by ANL and funded by DOE.\778\ The values for these
ranges are shown in the table below and are calculated with 95 percent
confidence intervals after analyzing the confidence bound using the
BatPac model.
---------------------------------------------------------------------------
\778\ Section 3.4.3.9 in Chapter 3 of the draft Joint TSD has a
detailed description of the history of the BatPac model and how the
agencies used it in this NPRM analysis.
[GRAPHIC] [TIFF OMITTED] TP01DE11.255
(7) Mass reduction cost: Due to the wide range of mass reduction
costs as discussed in Chapter 3 of the draft joint TSD, a sensitivity
analysis was performed examining the impact of the cost of vehicle mass
reduction to the total technology cost. The direct manufacturing cost
(DMC) for mass reduction is represented as a linear function between
the unit DMC versus percent of mass reduction, as shown in the figure
below:
[GRAPHIC] [TIFF OMITTED] TP01DE11.256
The slope of the line used in the central analysis for this NPRM is
$4.32 per pound per percent of mass reduction. The slope of the line is
varied + 40% as the upper and lower bound for this sensitivity study.
The resultant values
[[Page 75305]]
for the range of mass reduction cost are shown in the table below:
[GRAPHIC] [TIFF OMITTED] TP01DE11.257
(8) Market-driven response: The baseline for the central analysis
is based on the MY 2016 CAFE standards and assumes that manufacturers
will make no changes in the fuel economy from that level through MY
2025. A sensitivity analysis was performed to simulate potential
increases in fuel economy over the compliance level required if MY 2016
standards were to remain in place. The assumption is that the market
would drive manufacturers to put technologies into their vehicles that
they believe consumers would value and be willing to pay for. Using
parameter values consistent with the central analysis, the agency
simulated a market-driven response by applying a payback period of one
year for purposes of calculating the value of future fuel savings when
simulating whether manufacturers would apply additional technology to
an already CAFE-compliant fleet. In other words we assumed that
manufacturers that were above their MY 2016 CAFE level would compare
the cost to consumers to the fuel savings in the first year of
operation and decide to voluntarily apply those technologies to their
vehicles when benefits for the first year exceeded costs for the
consumer. For a manufacturer's fleet that has not yet achieved
compliance with CAFE standards, the agency continued to apply a five-
year payback period. In other words, for this sensitivity analysis the
agency assumed that manufacturers that have not yet met CAFE standards
for future model years will apply technology as if buyers were willing
to pay for the technologies as long as the fuel savings throughout the
first five years of vehicle ownership exceeded their costs. Once having
complied with those standards, however, manufacturers are assumed to
consider making further improvements in fuel economy as if buyers were
only willing to pay for fuel savings to be realized during the first
year of vehicle ownership. The `market-driven response' assumes that
manufacturers will overcomply if additional technology is sufficiently
cost-effective. Because this assumption has a greater impact under the
baseline standards, its application reduces the incremental costs,
effects, and benefits attributable to the new standards. This does not
mean that costs, effects, and benefits would actually be smaller with a
market-driven response; rather, it means that costs, effects, and
benefits would be at least as great, but would be partially
attributable not to the new standards, but instead to the market.
Varying each of these eight parameters in isolation results in a
variety of economic scenarios, in addition to the Reference case. These
are listed in Table IV-87 below.
BILLING CODE 4910-59-P
[[Page 75306]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.258
BILLING CODE 4910-59-C
The basic results of this sensitivity analysis are contained in
Chapter X of the PRIA, but several selected findings are as follows:
[[Page 75307]]
(1) Varying the economic assumptions has almost no impact on
achieved mpg. The mass reduction cost sensitivities, battery cost
reduction sensitivities, and the market-based baseline are the only
cases in which achieved mpg differs from the Reference Case of the
Preferred Alternative. None of these alter the outcome by more than 0.2
mpg for either fleet.
(2) Varying the economic assumptions has, at most, a small impact
on per-vehicle costs, fuel saved, and CO2 emissions
reductions, with none of the variations impacting the outcomes by more
than 10 percent from their central analysis levels, save for several
exceptions including alternate fuel price sensitivities and the
sensitivity involving a 20 percent rebound effect.
(3) The category most affected by variations in the economic
parameters considered in these sensitivity analyses is net benefits.
The sensitivity analyses examining the AEO Low and High fuel price
scenarios demonstrate the potential to negatively impact net benefits
by up to 40.3 percent or to increase net benefits by 29.5 percent
relative to those of the Preferred Alternative. Other large impacts on
net benefits occurred with the 20 percent rebound effect (-38.4%),
valuing benefits at 50 and 75 percent (-63.0% and -31.5%,
respectively), and valuing the reduction in CO2 emissions at
$67/ton (+28.1%).
(4) Even if consumers value the benefits achieved at 50% of the
main analysis assumptions, total benefits still exceed costs.
Regarding the lower fuel savings and CO2 emissions
reductions predicted by the sensitivity analysis as fuel price
increases, which initially may seem counterintuitive, we note that
there are some counterbalancing factors occurring. As fuel price
increases, people will drive less and so fuel savings and
CO2 emissions reductions may decrease.
The agency performed two additional sensitivity analyses presented
in Tables IV-88 and IV-89. First, the agency analyzed the impact that
having a retail price equivalent (RPE) factor of 1.5 for all
technologies would have on the various alternatives instead of using
the indirect cost methodology (ICM). The ICM methodology in an overall
markup factor of 1.2 to 1.25 compared to the RPE markup factor from
variable cost of 1.5. Next, the agency conducted a separate sensitivity
analysis using values that were derived from the 2011 NAS Report. This
analysis used an RPE markup factor of 1.5 for non-electrification
technologies, which is consistent with the NAS estimation for
technologies manufactured by suppliers, and an RPE markup factor of
1.33 for electrification technologies (HEV, PHEV, and EV); three types
of learning which include no learning for mature technologies, 1.25
percent annual learning for evolutionary technologies, and 2.5 percent
annual learning for revolutionary technologies; technology cost
estimates for 52 percent (33 out of 63) technologies; and technology
effectiveness estimates for 56 percent (35 out of 63) technologies.
Cost learning was applied to technology costs in a manner similar to
how cost learning is applied in the central analysis for many
technologies which have base costs that are applicable to recent or
near-term future model years. As noted above, the cost learning factors
used for the sensitivity case are different from the values used in the
central analysis. For the other inputs in the sensitivity case, where
the NAS study has inconsistent information or lacks projections, NHTSA
used the same input values that were used in the central analysis.
[[Page 75308]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.259
[[Page 75309]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.260
For today's rulemaking analysis, the agency has also performed a
sensitivity analysis where manufacturers are allowed to voluntarily
apply more technology than would be required to comply with CAFE
standards for each model year. Manufacturers are assumed to do so as
long as applying each additional technology would increase vehicle
production costs (including markup) by less than it would reduce
buyers' fuel costs during the first year they own the vehicle. This
analysis makes use of the ``voluntary overcompliance'' simulation
capability DOT has recently added to its CAFE model. This capability,
which is discussed further above in section IV.C.4.c and in the CAFE
model documentation, is a logical extension of the model's simulation
of some manufacturers' decisions to respond to EPCA by paying civil
penalties once additional technology becomes
[[Page 75310]]
economically unattractive. It attempts to simulate manufacturers'
responses to buyers' demands for higher fuel economy levels than
prevailing CAFE standards would require when fuel costs are
sufficiently high, and technologies that manufacturers have not yet
fully utilized are available to improve fuel economy at relatively low
costs.
NHTSA performed this analysis because some stakeholders commenting
on the recently-promulgated standards for medium- and heavy-duty
vehicles indicated that it would be unrealistic for the agency to
assume that in the absence of new regulations, technology and fuel
economy would not improve at all in the future. In other words, these
stakeholders argued that market forces are likely to result in some
fuel economy improvements over time, as potential vehicle buyers and
manufacturers respond to changes in fuel prices and in the availability
and costs of technologies to increase fuel economy. NHTSA agrees that,
in principle, its analysis should estimate a potential that
manufacturers will apply technology as if buyers place some value on
fuel economy improvements. Considering current uncertainties discussed
below regarding the degree to which manufacturers will do so, the
agency currently judges it appropriate to conduct its central
rulemaking analysis without attempting to simulate these effects.
Nonetheless, the agency believes that voluntary overcompliance is
sufficiently plausible that corresponding sensitivity analysis is
warranted.
NHTSA performed this analysis by simulating potential
overcompliance under the no-action alternative, the preferred
alternative, and other regulatory alternatives. In doing so, the agency
used all the same parameter values as in the agency's central analysis,
but applied a payback period of one year for purposes of calculating
the value of future fuel savings when simulating whether a manufacturer
would apply additional technology to an already CAFE-compliant fleet.
For technologies applied to a manufacturer's fleet that has not yet
achieved compliance with CAFE standards, the agency continued to apply
a five-year payback period.
In other words, for this sensitivity analysis the agency assumed
that manufacturers that have not yet met CAFE standards for future
model years will apply technology as if buyers were willing to pay for
fuel savings throughout the first five years of vehicle ownership. Once
having complied with those standards, however, manufacturers are
assumed to consider making further improvements in fuel economy as if
buyers were only willing to pay for fuel savings to be realized during
the first year of vehicle ownership. This reflects the agency's
assumptions for this sensitivity analysis, that (1) civil penalties,
though legally available, carry a stigma that manufacturers will strive
to avoid, and that (2) having achieved compliance with CAFE standards,
manufacturers will avoid competitive risks entailed in charging higher
prices for vehicles that offer additional fuel economy, rather than
offering additional performance or utility.
Since CAFE standards were first introduced, some manufacturers have
consistently exceeded those standards, and the industry as a whole has
consistently overcomplied with both the passenger car and light truck
standards. Although the combined average fuel economy of cars and light
trucks declined in some years, this resulted from buyers shifting their
purchases from passenger cars to light trucks, not from undercompliance
with either standard. Even with those declines, the industry still
overcomplied with both passenger car and light truck standards. In
recent years, between MYs 1999 and 2009, fuel economy overcompliance
has been increasing on average for both the passenger car and the light
truck fleets. NHTSA considers it impossible to say with certainty why
past fuel economy levels have followed their observed path. If the
agency could say with certainty how fuel economy would have changed in
the absence of CAFE standards, it might be able to answer this
question; however, NHTSA regards this ``counterfactual'' case as simply
unknowable.
NHTSA has, however, considered other relevant indications regarding
manufacturers' potential future decisions. Published research regarding
how vehicle buyers have previously viewed fuel economy suggests that
they have only a weak quantitative understanding of the relationship
between fuel economy and future fuel outlays, and that potential buyers
value fuel economy improvements by less than theoretical present-value
calculations of lifetime fuel savings would suggest. These findings are
generally consistent with manufacturers' confidential and, in some
cases, public statements. Manufacturers have tended to communicate not
that buyers absolutely ``don't care'' about fuel economy, but that
buyers have, in the past, not been willing to pay the full cost of most
fuel economy improvements. Manufacturers have also tended to indicate
that sustained high fuel prices would provide a powerful incentive for
increased fuel economy; this implies that manufacturers believe buyers
are willing to pay for some fuel economy increases, but that buyers'
willingness to do so depends on their expectations for future fuel
prices. In their confidential statements to the agency, manufacturers
have also tended to indicate that in their past product planning
processes, they have assumed buyers would only be willing to pay for
technologies that ``break even'' within a relatively short time--
generally the first two to four years of vehicle ownership.
NHTSA considers it not only feasible but appropriate to simulate
such effects by calculating the present value of fuel savings over some
``payback period.'' The agency also believes it is appropriate to
assume that specific improvements in fuel economy will be implemented
voluntarily if manufacturers' costs for adding the technology necessary
to implement them to specific models would be lower than potential
buyers' willingness to pay for the resulting fuel savings. This
approach takes fuel costs directly into account, and is therefore
responsive to manufacturers' statements regarding the role that fuel
prices play in influencing buyers' demands and manufacturers' planning
processes. Under this approach, a short payback period can be employed
if manufacturers are expected to act as if buyers place little value on
fuel economy. Conversely, a longer payback period can be used if
manufacturers are expected to act as if buyers will place comparatively
greater value on fuel economy.
NHTSA cannot be certain to what extent vehicle buyers will, in the
future, be willing to pay for fuel economy improvements, or to what
extent manufacturers would, in the future, voluntarily apply more
technology than needed to comply with fuel economy standards. The
agency is similarly hopeful that future vehicle buyers will be more
willing to pay for fuel economy improvements than has historically been
the case. In meetings preceding today's proposed standards, two
manufacturers stated they expected fuel economy to increase two percent
to three percent per year after MY 2016, absent more stringent
regulations. And in August 2010, one manufacturer stated its combined
fleet would achieve 50 mpg by MY 2025, supporting that at a minimum
some manufacturers believe that exceeding fuel economy standards will
provide them a competitive advantage. The agency is hopeful that future
vehicle buyers will be better-informed than has historically been the
case, in part because recently-
[[Page 75311]]
promulgated requirements regarding vehicle labels will provide clearer
information regarding fuel economy and the dollar value of resulting
fuel savings. The agency is similarly hopeful that future vehicle
buyers will be more willing to pay for fuel economy improvements than
past buyers. In meetings preceding today's proposed standards, many
manufacturers indicated significant shifts in their product plans--
shifts consistent with expectations that compared to past buyers,
future buyers will ``care more'' about fuel economy.
Nevertheless, considering the uncertainties mentioned above, NHTSA
continues to consider it appropriate to conduct its central rulemaking
analysis in a manner that ignores the possibility that in the future,
manufacturers will voluntarily apply more technology than the minimum
necessary to comply with CAFE standards. Also, in conducting its
sensitivity analysis to simulate voluntary overcompliance with the
proposed standards, the agency has applied the extremely conservative
assumption that when considering whether to employ ``extra''
technology, manufacturers will act as if buyers' value the resulting
savings in fuel costs only during their first year of ownership (i.e.,
as if a 1-year payback period applies).
Results of the agency's analysis simulating this potential for
voluntary overcompliance are summarized below. Compared to results from
the agencies' central analysis presented above, differences are
greatest for the baseline scenario (i.e., the No-Action Alternative),
under which CAFE standards remain unchanged after MY 2016. These
results also suggest, as the agency would expect, that because
increasingly stringent standards require progressively more technology
than the market will demand, the likelihood of voluntary overcompliance
will decline with increasing stringency. Achieved fuel economy levels
under baseline standards are as follows:
[GRAPHIC] [TIFF OMITTED] TP01DE11.261
With no change in standards after MY 2016, while combined average
fuel economy is the same in MY 2017 both with and without simulated
voluntary overcompliance, differences grow over time, reaching 0.8 mpg
in MY 2025. In other words, without simulating voluntary
overcompliance, the agency estimated that combined average achieved
fuel economy would reach 35.2 mpg in MY 2025, whereas the agency
estimates that it would reach 36.0 mpg in that year if voluntary
overcompliance occurred.
In contrast, the effect on achieved fuel economy levels of allowing
voluntary overcompliance with the proposed standards was minimal.
Allowing manufacturers to overcomply with the proposed standards for MY
2025 led to combined average achieved fuel economy levels approximately
equal to levels of values obtained without simulating voluntary
overcompliance:
[[Page 75312]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.262
As a result, NHTSA estimates that, when the potential for voluntary
overcompliance is taken into account, fuel savings attributable to more
stringent standards will total 162 billion gallons--6.4 percent less
than the 173 billion gallons estimated when potential voluntary
overcompliance is not taken into account:
[[Page 75313]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.263
The agency is not projecting, however, that fuel consumption will
be greater when voluntary overcompliance is taken into account. Rather,
under today's proposed standards, the agency's analysis shows virtually
identical fuel consumption (0.2 percent less over the useful lives of
MY 2017-2025 vehicles) when potential voluntary overcompliance is taken
into account. Simulation of voluntary overcompliance, therefore, does
not reduce the agency's estimate of future fuel savings over the
baseline scenario. Rather it changes the attribution of those fuel
savings to the proposed standards, because voluntary overcompliance
attributes some of the fuel savings to the market. The same holds for
the attribution of costs, other effects, and monetized benefits--
inclusion of voluntary overcompliance does not necessarily change their
amounts, but it does attribute some of each cost, effect, or benefit to
the workings of the market, rather than to the proposed standards.
The agency similarly estimates CO2 emissions reductions
attributable to today's proposed standards will total 1,726 million
metric tons (mmt), 5.8 percent less than the 1,834 mmt estimated when
potential voluntary overcompliance is not taken into account: \779\
---------------------------------------------------------------------------
\779\ Differences in the application of diesel engines and plug-
in hybrid electric vehicles lead to differences in the incremental
percentage changes in fuel consumption and carbon dioxide emissions.
---------------------------------------------------------------------------
[[Page 75314]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.264
Conversely, this analysis indicates slightly greater outlays for
additional technology under the proposed standards when potential
voluntary overcompliance is taken into account. This increase is
attributable to slight increases in technology application when
potential voluntary overcompliance is taken into account. Tables IV-99
and 100 below show that total technology costs attributable to today's
proposed standards are estimated to increase to $159 billion, or 1.3
percent more than the $157 billion estimated when potential voluntary
overcompliance was not taken into account:
[[Page 75315]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.265
Because NHTSA's analysis indicated that voluntary overcompliance
with baseline standards will slightly reduce the share of fuel savings
attributable to today's standards, the agency's estimate of the present
value of total benefits will be $484 billion when discounted at a 3
percent annual rate, as Tables IV-101 and 102 following report. This
estimate of total benefits is $31 billion, or about 6 percent, lower
than the $515 billion reported previously for the analysis in which
potential voluntary overcompliance was not taken into account:
[[Page 75316]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.266
Similarly, when accounting for potential voluntary overcompliance,
NHTSA estimates that the present value of total benefits will decline
from its previous estimate when future fuel savings and other benefits
are discounted at the higher 7 percent rate. Tables IV-103 and 104
report that the present value of benefits from requiring higher fuel
economy for MY 2017-25 cars and light trucks will total $394 billion
when discounted using a 7 percent rate, about $25 billion (or 6
percent) below the previous $419 billion estimate of total benefits
when potential voluntary overcompliance is not taken into account:
[[Page 75317]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.267
Based primarily on the reduction of benefits attributable to the
proposed standards when voluntary overcompliance is taken into account,
the agency estimates, as shown in Tables IV-105 and 106, that net
benefits from the proposed CAFE standards will be $325 billion--or 9.2
percent--less than the previously-reported estimate of $358 billion,
which did not incorporate the potential for voluntary overcompliance.
[[Page 75318]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.268
Similarly, Tables IV-107 and 108 immediately below show that NHTSA
estimates voluntary overcompliance could reduce net benefits
attributable to today's proposed standards to $235 billion if a 7
percent discount rate is applied to future benefits. This estimate is
$24 billion--or 10.3 percent--lower than the previously-reported $262
billion estimate of net benefits when potential voluntary
overcompliance is not taken into account, using that same discount
rate.
[[Page 75319]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.269
As discussed above, these reductions in fuel savings and avoided
CO2 emissions (and correspondingly, in total and net
benefits) attributable to today's proposed standards, do not indicate
that fuel consumption and CO2 emissions will be higher when
potential voluntary overcompliance with standards is taken into account
than when it is set aside. Rather, these reductions reflect differences
in attribution; when potential voluntary overcompliance is taken into
account, portions of the avoided fuel consumption and CO2
emissions (and, correspondingly, in total and net benefits) are
effectively attributed to the actions of the market, rather than to the
proposed CAFE standards.
NHTSA invites comment on this sensitivity analysis, in particular
regarding the following questions:
Is it reasonable to assume that, having achieved
compliance with CAFE standards, a manufacturer might consider further
fuel economy improvements, depending on technology costs and fuel
prices?
If so, does the agency's approach--comparing technology
costs to the present value of fuel savings over some payback period--
provide a reasonable means to simulate manufacturers' decisions? DOT's
consideration of any alternative methods will be facilitated by
specific suggestions regarding their integration into DOT's CAFE model.
Is it appropriate to assume different effective payback
periods before and after compliance has been achieved? Why, or why not?
What payback period is (or, if more than one, are) most
likely to reflect manufacturers' decisions regarding technology
application through MY 2025?
For more detailed information regarding NHTSA's sensitivity
analyses for this proposed rule, please see Chapter X of NHTSA's PRIA.
Additionally, due to the uncertainty and difficulty in projecting
technology cost and efficacy through 2025, and consistent with Circular
A-4, NHTSA conducted a full probabilistic uncertainty analysis, which
is included in Chapter XII of the PRIA. Results of the uncertainty
analysis are summarized below for model years 2017-2025 passenger car
and light truck fleets combined:
Total Benefits at 7% discount rate: Societal benefits will
total $46 billion to $725 billion, with a mean estimate of $373
billion.
Total Benefits at 3% discount rate: Societal benefits will
total $53 billion to $877 billion, with a mean estimate of $453
billion.
Total Costs at 7% discount rate: Costs will total between
$125 billion and $247 billion, with a mean estimate of $175 billion.
Total Costs at 3% discount rate: Costs will total between
$109 billion and $294 billion, with a mean estimate of $175 billion
5. How would these proposed standards impact vehicle sales?
In past fuel economy analyses, the agency has made estimates of
sales impacts comparing increases in vehicle price to the savings in
fuel over a 5 year period. We chose 5 years because this is
[[Page 75320]]
the average length of time of a financing agreement.\780\ As discussed
below, for this analysis we have conducted a fresh search of the
literature for additional estimates of consumer valuation of fuel
savings, in order to determine whether the 5 year assumption was
accurate or whether it should be revised. That search has led us to the
conclusion for this proposed rule that consumer valuation of future
fuel savings is highly uncertain. A negative impact on sales is
certainly possible, because the proposed rule will lead to an increase
in the initial price of vehicles. A positive impact is also possible,
because the proposed rule will lead to a significant decrease in the
lifetime cost of vehicles, and with consumer learning over time, this
effect may produce an increase in sales. In light of the relevant
uncertainties, the agency therefore decided not to include a
quantitative sales estimate and requests comments on all of the
discussion here, including the question whether a quantitative estimate
(or range) is possible.
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\780\ National average financing terms for automobile loans are
available from the Board of Governors of the Federal Reserve System
G.19 ``Consumer Finance'' release. See http://www.federalreserve.gov/releases/g19/ (last accessed August 25,
2011). The average new car loan at an auto finance company in the
first quarter of 2011 is for 62 months at 4.73%.
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The effect of this rule on sales of new vehicles depends largely on
how potential buyers evaluate and respond to its effects on vehicle
prices and fuel economy. The rule will make new cars and light trucks
more expensive, as manufacturers attempt to recover their costs for
complying with the rule by raising vehicle prices. At the same time,
the rule will require manufacturers to improve the fuel economy of many
of their models, which will lower their operating costs. The initial
cost of vehicles will increase but the overall cost will decrease. The
net effect on sales will depend on the extent to which consumers are
willing to pay for fuel economy.
The earlier discussion of consumer welfare suggests that by itself,
a net decrease in overall cost may not produce a net increase in sales,
because many consumers are more affected by upfront cost than by
overall cost, and will not be willing to purchase vehicles with greater
fuel economy even when it appears to be in their economic interest to
do so (assuming standard discount rates). But there is considerable
uncertainty in the economics literature about the extent to which
consumers value fuel savings from increased fuel economy, and there is
still more uncertainty about possible changes in consumer behavior over
time (especially with the likelihood of consumer learning). The effect
of this proposed regulation on vehicle sales will depend upon whether
the overall value that potential buyers place on the increased fuel
economy is greater or less than the increase in vehicle prices and how
automakers factor that into price setting for the various models.
Two economic concepts bear on how consumers might value fuel
savings. The first relates to the length of time that consumers
consider when valuing fuel savings and the second relates to the
discount rate that consumers apply to future savings. These two
concepts are used together to determine consumer valuation of future
fuel savings. The length of time that consumers consider when valuing
future fuel savings can significantly affect their decision when they
compare their estimates of fuel savings with the increased cost of
purchasing higher fuel economy. There is a significant difference in
fuel savings if you consider the savings over 1 year, 3 years, 5 years,
10 years, or the lifetime of the vehicle. The discount rate that
consumers use to discount future fuel savings to present value can also
have a significant impact. If consumers value fuel savings over a short
period, such as 1 to 2 years, then the discount rate is less important.
If consumers value fuel savings over a long period, then the discount
rate is important.
The Length of Time Consumers Consider When Valuing Fuel Savings
Information regarding the number of years that consumers value fuel
savings (or undervalue fuel savings) come from several sources. In past
analyses NHTSA has used five years as representing the average new
vehicle loan. A recent paper by David Greene \781\ examined studies
from the past 20 years of consumers' willingness to pay for fuel
economy and found that ``the available literature does not provide a
reasonable consensus.'' In his paper Greene states that ``manufacturers
have repeatedly stated that consumers will pay, in increased vehicle
price, for only 2-4 years in fuel savings.'' These estimates were
derived from manufacturer's own market research. And the National
Research Council \782\ used a 3 year payback period as one of its ways
to compare benefits to a full lifetime discounting. A survey conducted
for the Department of Energy in 2004,\783\ which asked 1,000 households
how much they would pay for a vehicle that saved them $400 or $1,200
per year in fuel costs, found implied payback periods of 1.5 to 2.5
years In reviewing this survey, Greene concluded: ``The striking
similarity of the implied payback periods from the two subsamples would
seem to suggest that consumers understand the questions and are giving
consistent and reliable responses: They require payback in 1.5 to 2.5
years.''
---------------------------------------------------------------------------
\781\ ``Why the Market for New Passenger Cars Generally
Undervalues Fuel Economy'', David Greene, Oak Ridge National
Laboratory, 2010, Pg. 17, http://www.internationaltransportforum.org/jtrc/DiscussionPapers/DP201006.pdf
\782\ National Research Council (2002) ``Effectiveness and
Impact of Corporate Average Fuel Economy (CAFE) Standards'',
National Academies Press, Washington DC.
\783\ Opinion Research Corporation (2004), ``CARAVAN'' ORC study
7132218, for the National Renewable Energy Laboratory
Princeton, New Jersey, May 20, 2004.
---------------------------------------------------------------------------
However, Turrentine and Kurani's \784\ in-depth interviews of 57
households found almost no evidence that consumers think about fuel
economy in terms of payback periods. When asked such questions, some
consumers became confused while others offered time periods that were
meaningful to them for other reasons, such as the length of their car
loan or lease.
---------------------------------------------------------------------------
\784\ Turrentine, T.S. and K.S. Kurani, 2007. ``Car Buyers and
Fuel Economy,'' Energy Policy, vol. 35, pp. 1213-1223.
---------------------------------------------------------------------------
The Discount Rate That Consumers Apply to Future Fuel Savings
The effective discount rate that consumers have used in the past to
value future fuel economy savings has been studied in many different
ways and by many different economists. Greene \785\ examined and
compiled many of these analyses and found: ``Implicit consumer discount
rates were estimated by Greene (1983) based on eight early mutinomial
logit choice models. * * * The estimates range from 0 to 73% * * * Most
fall between 4 and 40%.'' Greene added: ``The more recent studies
exhibit as least a wide a range as the earlier studies.''
---------------------------------------------------------------------------
\785\ ``Why the Market for New Passenger Cars Generally
Undervalues Fuel Economy'', David Greene, Oak Ridge National
Laboratory, 2010.
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With such uncertainty about how consumers value future fuel savings
and the discount rates they might use to determine the present value of
future fuel savings, NHTSA would utilize the standard 3 and 7 percent
discount rates. It is true that some consumers appear to show higher
discount rates, which would affect the analysis of likely sales
consequences; NHTSA invites comments on the nature and extent of that
effect.
In past analyses, NHTSA assumed that consumers would consider the
fuel savings they would obtain over the first
[[Page 75321]]
five years of vehicle ownership, which is consistent with the average
loan rates and the average length of first vehicle ownership. The five-
year span is somewhat longer than the period found to be used by
consumers in some studies, but use of a shorter period may also reflect
a lack of salience or related factors, and as noted, use of the five-
year span has the advantage of tracking the average length of first
vehicle ownership. NHTSA continues to use the five-year period here. As
with discount rates, NHTSA invites comments on this issue and in
particular on the possible use of a shorter period.
It is true that the payback period and discount rate are conceptual
proxies for consumer decisions that may often be made without any
corresponding explicit quantitative analysis. For example, some buyers
choosing among some set of vehicles may know what they have been paying
recently for gasoline, may know what they are likely to pay to buy each
of the vehicles consider, and may know some of the attributes--
including labeled fuel economies--of those vehicles. Such buyers may
then make a choice without actually trying to estimate how much they
would pay to fuel each of the vehicles they are considering buying. In
other words, for such buyers, the idea of a payback period and discount
rate may have no explicit meaning. This does not, however, limit the
utility of these concepts for the agency's analysis. If, as a group,
buyers behave as if they value fuel consumption considering a payback
period and discount rate, these concepts remain useful as a basis for
estimating the market response to increases in fuel economy accompanied
by increases in price.
NHTSA's Previous Analytical Approach Updated
There is a broad consensus in the economic literature that the
price elasticity for demand for automobiles is approximately -
1.0.786 787 788 Thus, every one percent increase in the
price of the vehicle would reduce sales by one percent. Elasticity
estimates assume no perceived change in the quality of the product.
However, in this case, vehicle price increases result from adding
technologies that improve fuel economy. This elasticity is generally
considered to be a short-run elasticity, reflecting the immediate
impacts of a price change on vehicle sales.
---------------------------------------------------------------------------
\786\ Kleit, A.N. (1990). ``The Effect of Annual Changes in
Automobile Fuel Economy Standards,'' Journal of Regulatory
Economics, vol. 2, pp 151-172. Docket EPA-HQ-OAR-2009-0472-0015.
787 Bordley, R. (1994). ``An Overlapping Choice Set
Model of Automotive Price Elasticities,'' Transportation Research B,
vol 28B, no 6, pp 401-408. Docket NHTSA-2009-0059-0153.
788 McCarthy, P.S. (1996). ``Market Price and Income
Elasticities of New Vehicle Demands,'' The Review of Economics and
Statistics, vol. LXXVII, no. 3, pp. 543-547. Docket NHTSA-2009-0059-
0039
---------------------------------------------------------------------------
For a durable good such as an auto, the elasticity may be smaller
in the long run: though people may be able to change the timing of
their purchase when price changes in the short run, they must
eventually make the investment. Using a smaller elasticity would reduce
the magnitude of the estimates presented here for vehicle sales, but it
would not change the direction. A short-run elasticity is more valid
for initial responses to changes in price, but, over time, a long-run
elasticity may better reflect behavior; thus, the results presented for
the initial years of the program may be more appropriate for modeling
with the short-run elasticity than the later years of the program. A
search of the literature has not found studies more recent than the
1970s that specifically investigate long-run elasticities.\789\
---------------------------------------------------------------------------
\789\ E.g., Hymans, Saul H. ``Consumer Durable Spending:
Explanation and Prediction.'' Brookings Papers on Economic Activity
1 (1970): 173-206.
http://www.brookings.edu/~/media/Files/Programs/ES/BPEA/1970--
2--bpea--papers/1970b--bpea--hymans--ackley--juster.pdf finds a
short-run elasticity of auto expenditures (not sales) with respect
to price of 0.78 to 1.17, and a long-run elasticity of 0.3 to 0.46.
---------------------------------------------------------------------------
One approach to determine the breakeven point between vehicle
prices and fuel savings is to look at the payback periods shown earlier
in this analysis. For example at a 3 percent discount rate, the payback
period for MY 2025 vehicles is 2 years for light trucks and 4 years for
passenger cars.
In determining the payback period we make several assumptions. For
example, we follow along with the calculations that are used for a 5
year payback period, as we have used in previous analyses. For the fuel
savings part of the equation, we assumed as a starting point that the
average purchaser considers the fuel savings they would receive over a
5 year timeframe. The present values of these savings were calculated
using a 3 and 7 percent discount rate. We used a fuel price forecast
(see Table VIII-3) that included taxes, because this is what consumers
must pay. Fuel savings were calculated over the first 5 years and
discounted back to a present value.
The agency believes that consumers may consider several other
factors over the 5 year horizon when contemplating the purchase of a
new vehicle. The agency added these factors into the calculation to
represent how an increase in technology costs might affect consumers'
buying considerations.
First, consumers might consider the sales taxes they have to pay at
the time of purchasing the vehicle. We took sales taxes in 2010 by
state and weighted them by population by state to determine a national
weighted-average sales tax of 5.5 percent.\790\
---------------------------------------------------------------------------
\790\ Based on data found in http://www.api.org/statistics/fueltaxes/
---------------------------------------------------------------------------
Second, we considered insurance costs over the 5 year period. More
expensive vehicles will require more expensive collision and
comprehensive (e.g., theft) car insurance. The increase in insurance
costs is estimated from the average value of collision plus
comprehensive insurance as a proportion of average new vehicle price.
Collision plus comprehensive insurance is the portion of insurance
costs that depend on vehicle value. The Insurance Information Institute
\791\ provides the average value of collision plus comprehensive
insurance in 2006 as $448, which is $480 in 2009$. The average consumer
expenditure for a new passenger car in 2010, according to the Bureau of
Economic Analysis was $24,092 and the average price of a new light
truck $30,641 in $2009.\792\ Using sales volumes from the Bureau, we
determined an average passenger car and an average light truck price
was $27,394 in $2009 dollars. Average prices and estimated sales
volumes are needed because price elasticity is an estimate of how a
percent increase in price affects the percent decrease in sales.
---------------------------------------------------------------------------
\791\ Insurance Information Institute, 2008, ``Average
Expenditures for Auto Insurance By State, 2005-2006,'' available at
http://www.iii.org/media/facts/statsbyissue/auto/ (last accessed
March 4, 2010).
\792\ U.S. Department of Commerce, Bureau of Economic Analysis,
Table 7.2.5S. Auto and Truck Unit Sales, Production, Inventories,
Expenditures, and Price, available at http://www.bea.gov/national/nipaweb/nipa_underlying/TableView.asp?SelectedTable=55&ViewSeries=NO&Java=.
---------------------------------------------------------------------------
Dividing the insurance cost by the average price of a new vehicle
gives the proportion of comprehensive plus collision insurance as 1.75%
of the price of a vehicle. If we assume that this premium is
proportional to the new vehicle price, it represents about 1.75 percent
of the new vehicle price and insurance is paid each year for the five
year period we are considering for payback. Discounting that stream of
insurance costs back to present value indicates that the present value
of the component of insurance costs that vary with vehicle price is
equal to 8.0 percent of the vehicle's price at a 3 percent discount
rate.
Third, we considered that 70 percent of new vehicle purchasers take
out loans
[[Page 75322]]
to finance their purchase. The average new vehicle loan in the first
quarter of 2011 is 5.3 percent.\793\ At these terms the average person
taking a loan will pay 14 percent more for their vehicle over the 5
years than a consumer paying cash for the vehicle at the time of
purchase.\794\ Discounting the additional 2.8 percent (14 percent/5
years) per year over the 5 years using a 3 percent mid-year discount
rate \795\ results in a discounted present value of 12.73 percent
higher for those taking a loan. Multiplying that by the 70 percent that
take a loan, means that the average consumer would pay 8.9 percent more
than the retail price for loans the consumer discounted at a 3 percent
discount rate.
---------------------------------------------------------------------------
\793\ New car loan rates in the first quarter of 2011 averaged
5.86 percent at commercial banks and 4.73 percent at auto finance
companies, so their average is close to 5.3 percent.
\794\ Based on www.bankrate.com auto loan calculator for a 5
year loan at 5.3 percent.
\795\ For a 3 percent discount rate, the summation of 2.8
percent x 0.9853 in year one, 2.8 x 0.9566 in year two, 2.8 x 0.9288
in year three, 2.8 x 0.9017 in year 4, and 2.8 x 0.8755 in year
five.
---------------------------------------------------------------------------
Fourth, we considered the residual value (or resale value) of the
vehicle after 5 years and expressed this as a percentage of the new
vehicle price. If the price of the vehicle increases due to fuel
economy technologies, the resale value of the vehicle will go up
proportionately. The average resale price of a vehicle after 5 years is
about 35% \796\ of the original purchase price. Discounting the
residual value back 5 years using a 3 percent discount rate (35 percent
* .8755) gives an effective residual value of 30.6 percent. Note that
added CAFE technology could also result in more expensive or more
frequent repairs. However, we do not have data to verify the extent to
which this would be a factor during the first 5 years of vehicle life.
---------------------------------------------------------------------------
\796\ Consumer Reports, August 2008,''What That Car Really Costs
to Own,'' available at http://www.consumerreports.org/cro/cars/pricing/what-that-car-really-costs-to-own-4-08/overview/what-that-car-really-costs-to-own-ov.htm (last accessed March 4, 2010).
---------------------------------------------------------------------------
We add these four factors together. At a 3 percent discount rate,
the consumer considers he could get 30.6 percent back upon resale in 5
years, but will pay 5.5 percent more for taxes, 8.1 percent more in
insurance, and 8.9 percent more for loans, results in a 8.1 percent
return on the increase in price for fuel economy technology (30.6
percent - 5.5 percent - 8.1 percent - 8.9 percent). Thus, the increase
in price per vehicle would be multiplied by 0.919 (1 - 0.081) before
subtracting the fuel savings to determine the overall net consumer
valuation of the increase of costs on this purchase decision. This
process results in estimates of the payback period for MY 2025 vehicles
of 2 years for light trucks and 4 years for passenger cars at a 3
percent discount rate.
A General Discussion of Consumer Considerations
If consumers do not value improved fuel economy at all, and
consider nothing but the increase in price in their purchase decisions,
then the estimated impact on sales from price elasticity could be
applied directly. However, the agency anticipates that consumers will
place some value improved fuel economy, because they reduce the
operating cost of the vehicles, and because, based on recently-
promulgated EPA and DOT regulations, vehicles sold during through 2025
will display labels that more clearly communicate to buyers the fuel
savings, economic, and environmental benefits of more efficient
vehicles. The magnitude of this effect remains unclear, and how much
consumers value fuel economy is an ongoing debate. We know that
different consumers value different aspects of their vehicle
purchase,\797\ but we do not have reliable evidence of consumer
behavior on this issue. Several past consumer surveys lead to different
conclusions (and surveys themselves, as opposed to actual behavior, may
not be entirely informative). We also expect that consumers will
consider other factors that affect their costs, and have included these
in the analysis.
---------------------------------------------------------------------------
\797\ For some consumers there will be a cash-flow problem in
that the vehicle is purchased at a higher price on day 1 and fuel
savings occur over the lifetime of the vehicle. Increases in prices
have sometimes led to longer loan periods, which would lead to
higher overall costs of the loan.
---------------------------------------------------------------------------
One issue that significantly affects this sales analysis is: How
much of the retail price increase needed to cover the fuel economy
technology investments will manufacturers be able to pass on to
consumers? NHTSA typically assumes that manufacturers will be able to
pass all of their costs to improve fuel economy on to consumers.
Consumer valuation of fuel economy improvements often depends upon the
price of gasoline, which has recently been very volatile.
Sales losses would occur only if consumers fail to value fuel
economy improvements at least as much as they pay in higher prices. If
manufacturers are unable to raise prices beyond the level of consumer's
valuation of fuel savings, then manufacturer's profit levels would fall
but there would be no impact on sales. Likewise, if fuel prices rise
beyond levels used in this analysis, consumer's valuation of improved
fuel economy could increase to match or exceed their initial
investment, resulting in no impact or even an increase in sales levels.
The agency has been exploring the question why there is not more
consumer demand for higher fuel economy today when linked with our
methodology that results in projecting increasing sales for the future
when consumers are faced with rising vehicle prices and rising fuel
economy. Some of the discussion of salience, focus on the short-term,
loss aversion, and related factors (see above) bears directly on that
question. It is possible, in that light, that consumers will not demand
increased fuel economy even when such increases would produce net
benefits for them.
Nonetheless, some current vehicle owners, including those who
currently drive gas guzzlers, will undoubtedly realize the net benefits
to be gained by purchasing a more efficient vehicle. Some vehicle
owners may also react to persistently higher vehicle costs by owning
fewer vehicles, and keeping existing vehicles in service for somewhat
longer. For these consumers, the possibility exists that there may be
permanent sales losses, compared with a situation in which vehicle
prices are lower.
There is a wide variety in the number of miles that owners drive
per year. Some drivers only drive 5,000 miles per year and others drive
25,000 miles or more. Rationally those that drive many miles have more
incentive to buy vehicles with high fuel economy levels
In summary, there are a variety of types of consumers that are in
different financial situations and drive different mileages per year.
Since consumers are different and use different reasoning in purchasing
vehicles, and we do not yet have an account of the distribution of
their preferences or how that may change over time as a result of this
rulemaking -- in other words, the answer is quite ambiguous. Some may
be induced by better fuel economy to purchase vehicles more often to
keep up with technology, some may purchase no new vehicles because of
the increase in vehicle price, and some may purchase fewer vehicles and
hold onto their vehicles longer. There is great uncertainty about how
consumers value fuel economy, and for this reason, the impact of this
fuel economy proposal on sales is uncertain.
For years, consumers have been learning about the benefits that
accrue to them from owning and operating vehicles with greater fuel
efficiency. Consumer demand has thus shifted towards such vehicles, not
only because of higher fuel prices but also because
[[Page 75323]]
many consumers are learning about the value of purchases based not only
on initial costs but also on the total cost of owning and operating a
vehicle over its lifetime. This type of learning is expected to
continue before and during the model years affected by this rule,
particularly given the new fuel economy labels that clarify potential
economic effects and should therefore reinforce that learning.
Therefore, some increase in the demand for, and production of, more
fuel efficient vehicles is incorporated in the alternative baseline
(i.e., without these rules) developed by NHTSA. The agency requests
comment on the appropriateness of using a flat or rising baseline after
2016.
Today's proposed rule, combined with the new and easier-to-
understand fuel economy label required to be on all new vehicles
beginning in 2012, may increase sales above baseline levels by
hastening this very type of consumer learning. As more consumers
experience, as a result of the rule, the savings in time and expense
from owning more fuel efficient vehicles, demand may shift yet further
in the direction of the vehicles mandated under the rule. This social
learning can take place both within and across households, as consumers
learn from one another.
First and most directly, the time and fuel savings associated with
operating more fuel efficient vehicles will be more salient to
individuals who own them, causing their subsequent purchase decisions
to shift closer to minimizing the total cost of ownership over the
lifetime of the vehicle. Second, this appreciation may spread across
households through word of mouth and other forms of communications.
Third, as more motorists experience the time and fuel savings
associated with greater fuel efficiency, the price of used cars will
better reflect such efficiency, further reducing the cost of owning
more efficient vehicles for the buyers of new vehicles (since the
resale price will increase).
If these induced learning effects are strong, the rule could
potentially increase total vehicle sales over time. These increased
sales would not occur in the model years first affected by the rule,
but they could occur once the induced learning takes place. It is not
possible to quantify these learning effects years in advance and that
effect may be speeded or slowed by other factors that enter into a
consumer's valuation of fuel efficiency in selecting vehicles.
The possibility that the rule will (after a lag for consumer
learning) increase sales need not rest on the assumption that
automobile manufacturers are failing to pursue profitable opportunities
to supply the vehicles that consumers demand. In the absence of the
rule, no individual automobile manufacturer would find it profitable to
move toward the more efficient vehicles mandated under the rule. In
particular, no individual company can fully internalize the future
boost to demand resulting from the rule. If one company were to make
more efficient vehicles, counting on consumer learning to enhance
demand in the future, that company would capture only a fraction of the
extra sales so generated, because the learning at issue is not specific
to any one company's fleet. Many of the extra sales would accrue to
that company's competitors.
In the language of economics, consumer learning about the benefits
of fuel efficient vehicles involves positive externalities (spillovers)
from one company to the others.\798\ These positive externalities may
lead to benefits for manufacturers as a whole.
---------------------------------------------------------------------------
\798\ Industry-wide positive spillovers of this type are hardly
unique to this situation. In many industries, companies form trade
associations to promote industry-wide public goods. For example,
merchants in a given locale may band together to promote tourism in
that locale. Antitrust law recognizes that this type of coordination
can increase output.
---------------------------------------------------------------------------
We emphasize that this discussion has been tentative and qualified.
To be sure, social learning of related kinds has been identified in a
number of contexts.\799\ Comments are invited on the discussion offered
here, with particular reference to any relevant empirical findings.
---------------------------------------------------------------------------
\799\ See Hunt Alcott, Social Norms and Energy Conservation,
Journal of Public Economics (forthcoming 2011), available at http://web.mit.edu/allcott/www/Allcott%202011%20JPubEc%20-%20Social%20Norms%20and%20Energy%20Conservation.pdf; Christophe
Chamley, Rational Herds: Economic Models of Social Learning
(Cambridge, 2003).
---------------------------------------------------------------------------
How does NHTSA plan to address this issue for the final rule?
NHTSA seeks comment on how to attempt to quantify sales impacts of
the proposed MYs 2017-2025 CAFE standards in light of the uncertainty
discussed above. The agency is currently sponsoring work to develop a
vehicle choice model for potential use in the agency's future
rulemaking analysis--this work may help to better estimate the market's
effective valuation of future fuel economy improvements. The agency
hopes to evaluate those potential impacts through use of a ``market
shift'' or ``consumer vehicle choice'' model, discussed in Section IV
of the NPRM preamble. With an integrated market share model, the CAFE
model would then estimate how the sales volumes of individual vehicle
models would change in response to changes in fuel economy levels and
prices throughout the light vehicle market, possibly taking into
account interactions with the used vehicle market. Having done so, the
model would replace the sales estimates in the original market forecast
with those reflecting these model-estimated shifts, repeating the
entire modeling cycle until converging on a stable solution. We seek
comment on the potential for this approach to help the agency estimate
sales effects for the final rule.
Others Studies of the Sales Effect of This CAFE Proposal
We outline here other relevant studies and seek comment on their
assumptions and projections.
A recent study on the effects on sales, attributed to regulatory
programs, including the fuel economy program was undertaken by the
Center for Automotive Research (CAR).\800\ CAR examined the impacts of
alternative fuel economy increases of 3%, 4%, 5%, and 6% per year on
the general outlook for the U.S. motor vehicle market, the likely
increase in costs for fuel economy (based on the NAS report, which
estimates higher costs than NHTSA's current estimates) and required
safety features, the technologies used and how they would affect the
market, production, and automotive manufacturing employment in the year
2025. The required safety mandates were assumed to cost $1,500 per
vehicle in 2025, but CAR did not value the safety benefits from those
standards. NHTSA does not believe that the assumed safety mandates
should be a part of this analysis without estimating the benefits
achieved by the safety mandates.
---------------------------------------------------------------------------
\800\ ``The U.S. Automotive Market and Industry in 2025'',
Center for Automotive Research, June 2011. http://www.cargroup.org/pdfs/ami.pdf.
---------------------------------------------------------------------------
There are many factors that go into the CAR analysis of sales. CAR
assumes a 22.0 mpg baseline, two gasoline price scenarios of $3.50 and
$6.00 per gallon, VMT schedules by age, and a rebound rate of 10
percent (although it appears that the CAR report assumes a rebound
effect even for the baseline and thus negates the impact of the rebound
effect). Fuel savings are assumed to be valued by consumers over a 5
year period at a 10 percent discount rate. The impact on sales varies
by scenario, the estimates of the cost of technology, the price of
gasoline, etc. At $3.50 per gallon, the net change in consumer savings
(costs minus the fuel savings
[[Page 75324]]
valued by consumers) is a net cost to consumers of $359 for the 3%
scenario, a net cost of $1,644 for the 4% scenario, a net cost of
$2,858 for the 5% scenario, and a net consumer cost of $6,525 for the
6% scenario. At $6.00 per gallon, the net change in consumer savings
(costs minus the fuel savings valued by consumers) is a net savings to
consumers of $2,107 for the 3% scenario, a net savings of $1,131 for
the 4% scenario, a net savings of $258 for the 5% scenario, and a net
consumer cost of $3,051 for the 6% scenario. Thus, the price of
gasoline can be a significant factor in affecting how consumers view
whether they are getting value for their expenditures on technology.
Table 14 on page 42 of the CAR report presents the results of their
estimates of the 4 alternative mpg scenarios and the 2 prices of
gasoline on light vehicle sales and automotive employment. The table
below shows these estimates. The baseline for the CAR report is 17.9
million sales and 877,075 employees. The price of gasoline at $6.00 per
gallon, rather than $3.50 per gallon results in about 2.1 million
additional sales per year and 100,000 more employees in year 2025.
[GRAPHIC] [TIFF OMITTED] TP01DE11.270
Figure 13 on page 44 of the CAR report shows a graph of historical
automotive labor productivity, indicating that there has been a long
term 0.4 percent productivity growth rate from 1960-2008, to indicate
that there will be 12.26 vehicles produced in the U.S. per worker in
2025 (which is higher than NHTSA's estimate--see below). In addition,
the CAR report discusses the jobs multiplier. For every one automotive
manufacturing job, they estimate the economic contribution to the U.S.
economy of 7.96 jobs \801\ stating ``In 2010, about 1 million direct
U.S. jobs were located at an auto and auto parts manufacturers; these
jobs generated an additional 1.966 million supplier jobs, largely in
non-manufacturing sectors of the economy. The combined total of 2.966
million jobs generated a further spin-off of 3.466 million jobs that
depend on the consumer spending of direct and supplier employees, for a
total jobs contribution from U.S. auto manufacturing of 6.432 million
jobs in 2010. The figure actually rises to 7.96 million when direct
jobs located at new vehicle dealerships (connected to the sale and
service of new vehicles) are considered.''
---------------------------------------------------------------------------
\801\ Kim Hill, Debbie Menk, and Adam Cooper, ``Contribution of
the Automotive Industry to the Economies of All Fifty States and the
United States'', The Center for Automotive Research, Ann Arbor MI,
April 2010.
---------------------------------------------------------------------------
CAR uses econometric estimates of the sensitivity of new vehicle
purchases to prices and consumer incomes and forecasts of income growth
through 2025 to translate these estimated changes in net vehicle prices
to estimates of changes in sales of MY 2025 vehicles; higher net
prices--which occur when increases in vehicle prices exceeds the value
of fuel savings--reduce vehicle sales, while lower net prices increase
new vehicle sales in 2025. We do not have access to the statistical
models that CAR develops to estimate the effects of price and income
changes on vehicle sales. CAR's analysis assumes continued increases in
labor productivity over time and then translates the estimated impacts
of higher CAFE standards on net vehicle prices into estimated impacts
on sales and employment in the automobile production and related
industries. The agency disagrees with the cost estimates in the CAR
report for new technologies, the addition of safety mandates into the
costs, and various other assumptions.
An analysis conducted by Ceres and Citigroup Global Markets
Inc.\802\ examined the impact on automotive sales in 2020, with a
baseline assumption of an industry fuel economy standard of 42 mpg, a
$4.00 price of
[[Page 75325]]
gasoline, a 12.2 percent discount rate and an assumption that buyers
value 48% of fuel savings over seven years in purchasing vehicles. The
main finding on sales was that light vehicle sales were predicted to
increase by 6% from 16.3 million to 17.3 million in 2020. Elasticity is
not provided in the report but it states that they use a complex model
of price elasticity and cross elasticities developed by GM. A fuel
price risk factor \803\ was utilized. Little rationale was provided for
the baseline assumptions, but sensitivity analyses were examined around
the price of fuel ($2, $4, and $7 per gallon), the discount rate (5.2%,
12.2%, 17.2%), purchasers consider fuel savings over (3, 7, or 15
years), fuel price risk factor of (30%, 70%, or 140%), and VMT of
(10,000, 15,000, and 20,000 in the first year and declining
thereafter).
---------------------------------------------------------------------------
\802\ ``U.S. Autos, CAFE and GHG Emissions'', March 2011, Citi
Ceres, UMTRI, Baum and Associates, Meszler Engineering Services, and
the Natural Resources Defense Council. http://www.ceres.org/resources/reports/fuel-economy-focus.
\803\ Fuel price risk factor measures the rate at which
consumers are willing to trade reductions in fuel costs for
increases in purchase price. For example, a fuel price risk factor
of 1.0 would indicate the consumers would be willing to pay $1 for
an improvement in fuel economy that resulted in reducing by $1 the
present value of the savings in fuel costs.
---------------------------------------------------------------------------
6. Social Benefits, Private Benefits, and Potential Unquantified
Consumer Welfare Impacts of the Proposed Standards
There are two viewpoints for evaluating the costs and benefits of
the increase in CAFE standards: the private perspective of vehicle
buyers themselves on the higher fuel economy levels that the rule would
require, and the economy-wide or ``social'' perspective on the costs
and benefits of requiring higher fuel economy. In order to appreciate
how these viewpoints may diverge, it is important to distinguish
between costs and benefits that are ``private'' and costs and benefits
that are ``social,'' The agency's analysis of benefits and costs from
requiring higher fuel efficiency, presented above, includes several
categories of benefits (identified as ``social benefits'') that are not
limited to automobile purchasers, and that extend throughout the U.S.
economy. Examples of these benefits include reductions in the energy
security costs associated with U.S. petroleum imports, and in the
economic damages expected to result from air pollution (including, but
not limited to, climate change). In contrast, other categories of
benefits--principally future fuel savings projected to result from
higher fuel economy, but also, for example, time savings--will be
experienced exclusively by the initial purchasers and subsequent owners
of vehicle models whose fuel economy manufacturers elect to improve
(``private benefits'').
The economy-wide or ``social'' benefits from requiring higher fuel
economy represent an important share of the total economic benefits
from raising CAFE standards. At the same time, NHTSA estimates that
benefits to vehicle buyers themselves will significantly exceed vehicle
manufacturers' costs for complying with the stricter fuel economy
standards this rule establishes. In short, consumers will benefit on
net. Since the agency also assumes that the costs of new technologies
manufacturers will employ to improve fuel economy will ultimately be
borne by vehicle buyers in the form of higher purchase prices, NHTSA
concludes that the benefits to potential vehicle buyers from requiring
higher fuel efficiency will far outweigh the costs they will be
required to pay to obtain it. NHTSA also recognizes that this
conclusion raises certain issues, addressed directly below; NHTSA also
seeks public comment on its discussion here.
As an illustration, Tables IV-110 and 111 report the agency's
estimates of the average lifetime values of fuel savings for MY 2017-
2025 passenger cars and light trucks calculated using projected future
retail fuel prices. The table compares NHTSA's estimates of the average
lifetime value of fuel savings for cars and light trucks to the price
increases it expects to occur as manufacturers attempt to recover their
costs for complying with increased CAFE standards. As the table shows,
the agency's estimates of the present value of lifetime fuel savings
(discounted using the OMB-recommended 3% rate) substantially outweigh
projected vehicle price increases for both cars and light trucks in
every model year, even under the assumption that all of manufacturers'
technology outlays are passed on to buyers in the form of higher
selling prices for new cars and light trucks. By model year 2025, NHTSA
projects that average lifetime fuel savings will exceed the average
price increase by more than $2,900 for cars, and by more than $5,200
for light trucks.
[[Page 75326]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.271
The comparisons above immediately raise the question of why current
vehicle purchasing patterns do not already result in average fuel
economy levels approaching those that this rule would require, and why
raising CAFE standards should be necessary to increase the fuel economy
of new cars and light trucks. They also raise the question of whether
it is appropriate to assume that manufacturers would not elect to
provide higher fuel economy even in the absence of increases in CAFE
standards, since the comparisons in Tables IV-109 and 110 suggest that
doing so would increase the market value (and thus the selling prices)
of many new vehicle models by far more than it would raise the cost of
producing them. Thus, increasing fuel economy would be expected to
increase sales of new vehicles and manufacturers' profits. More
specifically, why would potential buyers of new vehicles
[[Page 75327]]
hesitate to purchase models offering higher fuel economy, when doing so
would produce the substantial economic returns illustrated by the
comparisons presented in Tables IV-109 and 110? And why would
manufacturers voluntarily forego opportunities to increase the
attractiveness, value, and competitive positioning of their car and
light truck models--and thus their own profits--by improving their fuel
economy?
One explanation for why this situation might persist is that the
market for vehicle fuel economy does not appear to work perfectly, in
which case properly designed CAFE standards would be expected to
increase consumer welfare. Some of these imperfections might stem from
standard market failures, such as limited availability of information
to consumers about the value of higher fuel economy. It is true, of
course, that such information is technically available and that new
fuel economy and environment vehicle labels, emphasizing economic
effects, will provide a wide range of relevant information. Other
explanations would point to phenomena observed elsewhere in the field
of behavioral economics, including loss aversion, inadequate consumer
attention to long-term savings, or a lack of salience of relevant
benefits (such as fuel savings, or time savings associated with
refueling) to consumers at the time they make purchasing decisions.
Both theoretical and empirical research suggests that many consumers
are unwilling to make energy-efficient investments even when those
investments appear to pay off in the relatively short-term.\804\ This
research is in line with related findings that consumers may undervalue
benefits or costs that are less salient, or that they will realize only
in the future.\805\
---------------------------------------------------------------------------
\804\ Jaffe, A. B., and Stavins, R. N. (1994). The Energy
Paradox and the Diffusion of Conservation Technology. Resource and
Energy Economics, 16(2); see Hunt Alcott and Nathan Wozny, Gasoline
Prices, Fuel Economy, and the Energy Paradox (2009), available at
http://web.mit.edu/allcott/www/Allcott%20and%20Wozny%202010%20-%20Gasoline%20Prices,%20Fuel%20Economy,%20and%20the%20Energy%20Paradox.pdf (last accessed Sept. 26, 2011). For relevant background, with
an emphasis on the importance of salience and attention, see
Kahneman, D. Thinking, Fast and Slow (2011).
\805\ Mutulinggan, S., C. Corbett, S. Benzarti, and B.
Oppenheim. ``Investment in Energy Efficiency by Small and Medium-
Size Firms: An Empirical Analysis of the Adoption of Process
Improvement Recommendations'' (2011), available at http://papers.ssrn.com/sol3/papers/cfm?abstract_id=1947330. Hossain,
Janjim, and John Morgan (2009). '' * * * Plus Shipping and Handling:
Revenue (Non)Equivalence in Field Experiments on eBay,'' Advances in
Economic Analysis and Policy vol. 6; Barber, Brad, Terrence Odean,
and Lu Zheng (2005). ``Out of Sight, Out of Mind: The Effects of
Expenses on Mutual Fund Flows,'' Journal of Business vol. 78, no. 6,
pp. 2095-2020.
---------------------------------------------------------------------------
Previous research provides some support for the agency's conclusion
that the benefits buyers will receive from requiring manufacturers to
increase fuel economy outweigh the costs they will pay to acquire those
benefits, even if private markets have not provided that amount of fuel
economy. This research identifies aspects of normal behavior that may
explain the market not providing vehicles whose higher fuel economy
appears to offer an attractive economic return. For example, consumers'
aversion to the prospect of losses (``loss aversion'') and especially
immediate, certain losses, may affect their decisions when they also
have a sense of uncertainty about the value of future fuel savings.
Loss aversion, accompanied with a sense of uncertainty about gains, may
make purchasing a more fuel-efficient vehicle seem unattractive to some
potential buyers, even when doing so is likely to be a sound economic
decision. As an illustration, Greene et al. (2009) calculate that the
expected net present value of increasing the fuel economy of a
passenger car from 28 to 35 miles per gallon falls from $405 when
calculated using standard net present value calculations, to nearly
zero when uncertainty regarding future cost savings and buyers'
reluctance to accept the risk of losses are taken into account.\806\
---------------------------------------------------------------------------
\806\ Greene, D., J. German, and M. Delucchi (2009). ``Fuel
Economy: The Case for Market Failure'' in Reducing Climate Impacts
in the Transportation Sector, Sperling, D., and J. Cannon, eds.
Springer Science. Surprisingly, the authors find that uncertainty
regarding the future price of gasoline appears to be less important
than uncertainty surrounding the expected lifetimes of new vehicles.
(Docket NHTSA-2009-0059-0154). On loss aversion in general, and its
relationship to prospect theory (which predicts that certain losses
will loom larger than probabilistic gains of higher expected value),
see Kahneman.
---------------------------------------------------------------------------
The well-known finding that as gas prices rise, consumers show more
willingness to pay for fuel-efficient vehicles is not necessarily
inconsistent with the possibility that many consumers undervalue
potential savings in gasoline costs and fuel economy when purchasing
new vehicles. In ordinary circumstances, such costs may be a relatively
``shrouded'' attribute in consumers' decisions, in part because the
savings from purchasing a more fuel efficient vehicle are cumulative
and extend over a significant period of time. At the same time, it may
be difficult for potential buyers to disentangle the cost of purchasing
a more fuel-efficient vehicle from its overall purchase price, or to
isolate the value of higher fuel economy form accompanying differences
in other vehicle attributes. This possibility is consistent with recent
evidence to the effect that many consumers are willing to pay less than
$1 upfront to obtain a $1 reduction in the discounted present value of
future gasoline costs.\807\
---------------------------------------------------------------------------
\807\ See, e.g., Alcott and Wozny. On shrouded attributes and
their importance, see Gabaix, Xavier, and David Laibson, 2006.
``Shrouded Attributes, Consumer Myopia, and Information Suppression
in Competitive Markets.'' Quarterly Journal of Economics 121(2):
505-540.
---------------------------------------------------------------------------
Some research suggests that the market's apparent unwillingness to
provide more fuel efficient vehicles stems from consumers' inability to
value future fuel savings correctly. For example, Larrick and Soll
(2008) find evidence that consumers do not understand how to translate
changes in fuel economy, which is denominated in miles per gallon
(MPG), into resulting changes in fuel consumption, measured for example
in gallons 100 miles traveled or per month or year.\808\ It is true
that the recently redesigned fuel economy and environment label should
help overcome this difficulty, because it draws attention to purely
economic effects of fuel economy, but MPG remains a prominent measure.
Sanstad and Howarth (1994) argue that consumers often resort to
imprecise but convenient rules of thumb to compare vehicles that offer
different fuel economy ratings, and that this can cause many buyers to
underestimate the value of fuel savings, particularly from significant
increases in fuel economy.\809\ If the behavior identified in these
studies is widespread, then the agency's estimates suggesting that the
benefits to vehicle owners from requiring higher fuel economy
significantly exceed the costs of providing it may be consistent with
private markets not providing that fuel economy level.
---------------------------------------------------------------------------
\808\ Larrick, R. P., and J. B. Soll (2008). ``The MPG
illusion'' Science 320: 1593-1594.
\809\ Sanstad, A., and R. Howarth (1994). `` `Normal' Markets,
Market Imperfections, and Energy Efficiency.'' Energy Policy 22(10):
811-818.
---------------------------------------------------------------------------
The agency projects that the typical vehicle buyer will experience
net savings from the proposed standards, yet it is not simple to
reconcile this projection with the fact that the average fuel economy
of new vehicles sold currently falls well short of the level those
standards would require. The foregoing discussion offers several
possible explanations. One possible explanation for this apparent
inconsistency is that many of the technologies projected by the agency
to be available through MY 2025 offer significantly improved efficiency
per unit of cost, but were not available for application to new
vehicles sold currently. Another is that the perceived and real values
of future savings resulting from the proposed standards will vary
widely among potential
[[Page 75328]]
vehicle buyers. When they purchase a new vehicle, some buyers value
fuel economy very highly, and others value fuel economy very little, if
at all. These differences undoubtedly reflect variation in the amount
they drive, differences in their driving styles affect the fuel economy
they expect to achieve, and varying expectations about future fuel
prices, but they may also partly reflect differences in buyers'
understanding of what increased fuel economy is likely to mean to them
financially, or in buyers' preferences for paying lower prices today
versus anticipated savings over the future.
Unless the agency has overestimated their average value, however,
the fact that the value of fuel savings varies among potential buyers
cannot explain why typical buyers do not currently purchase what appear
to be cost-saving increases in fuel economy. A possible explanation for
this situation is that the effects of differing fuel economy levels are
relatively modest when compared to those provided by other, more
prominent features of new vehicles, such as passenger and cargo-
carrying capacity, performance, or safety. In this situation, it may
simply not be in many shoppers' interest to spend the time and effort
necessary to determine the economic value of higher fuel economy, to
isolate the component of a new vehicle's selling price that is related
to its fuel economy, and compare these two. (This possibility is
consistent with the view that fuel economy is a relatively ``shrouded''
attribute.) In this case, the agency's estimates of the average value
of fuel savings that will result from requiring cars and light trucks
to achieve higher fuel economy may be correct, yet those savings may
not be large enough to lead a sufficient number of buyers to purchase
vehicles with higher fuel economy to raise average fuel economy above
its current levels.
Defects in the market for cars and light trucks could also lead
manufacturers to undersupply fuel economy, even in cases where many
buyers were willing to pay the increased prices necessary to compensate
manufacturers for providing it. To be sure, the market for new
automobiles as a whole exhibits a great deal of competition. But this
apparently vigorous competition among manufacturers may not extend to
the provision of some individual vehicle attributes. Incomplete or
``asymmetric'' access to information about vehicle attributes such as
fuel economy--whereby manufacturers of new cars and light trucks or
sellers of used models have more complete knowledge about vehicles'
actual fuel economy performance than is available to their potential
buyers--may also prevent sellers of new or used vehicles from being
able to capture its full value. In this situation, the level of fuel
efficiency provided in the markets for new or used vehicles might
remain persistently lower than that demanded by well-informed potential
buyers.
Constraints on the combinations of fuel economy, carrying capacity,
and performance that manufacturers can offer in individual vehicle
models using current technologies undoubtedly limit the range of fuel
economy available within certain vehicle classes, particularly those
including larger vehicles. However, it is also possible that deliberate
decisions by manufacturers of cars and light trucks further limit the
range of fuel economy available to buyers within individual vehicle
market segments, such as large automobiles, SUVs, or minivans.
Manufacturers may deliberately limit the range of fuel economy levels
they offer in those market segments (by choosing not to invest in fuel
economy and investing instead in providing a range of other vehicle
attributes) because they underestimate the premiums that prospective
buyers of those models are willing to pay for improved fuel economy,
and thus mistakenly believe it will be unprofitable for them to offer
more fuel-efficient models within those segments. Of course, this
possibility is most realistic if it is also assumed that buyers are
imperfectly informed, or if fuel economy savings are not sufficiently
salient to shoppers in those particular market segments. As an
illustration, once a potential buyer has decided to purchase a minivan,
the range of highway fuel economy ratings among current models extends
from 22 to 28 mpg, while their combined city and highway ratings extend
only from 18 to 20 mpg.\810\ If this phenomenon is widespread, the
average fuel efficiency of their entire new vehicle fleet could remain
below the levels that potential buyers demand and are willing to pay
for.
---------------------------------------------------------------------------
\810\ This is the range of combined city and highway fuel
economy levels from lowest (Toyota Sienna AWD) to highest (Honda
Odyssey) available for model year 2010; http://www.fueleconomy.gov/feg/bestworstEPAtrucks.htm (last accessed September 26, 2011).
---------------------------------------------------------------------------
Another possible explanation for the paradox posed by buyers'
apparent unwillingness to invest in higher fuel economy when it appears
to offer such large financial returns is that NHTSA's estimates of
benefits and costs from requiring manufacturers to improve fuel
efficiency do not match potential buyers' assessment of the likely
benefits and costs from purchasing models with higher fuel economy
ratings. This could occur because the agency's underlying assumptions
about some of the factors that affect the value of fuel savings differ
from those made by potential buyers, because NHTSA has used different
estimates for some components of the benefits from saving fuel from
those of buyers, or simply because the agency has failed to account for
some potential costs of achieving higher fuel economy.
For example, buyers may not value increased fuel economy as highly
as the agency's calculations suggest, because they have shorter time
horizons than the full vehicle lifetimes NHTSA uses in these
calculations, or because they discount future fuel savings using higher
rates than those prescribed by OMB for evaluating Federal regulations.
Potential buyers may also anticipate lower fuel prices in the future
than those forecast by the Energy Information Administration, or may
expect larger differences between vehicles' MPG ratings and their own
actual on-road fuel economy than the 20 percent gap (30 percent for
HEVs) the agency estimates.
To illustrate the first of these possibilities, Table IV-111 shows
the effect of differing assumptions about vehicle buyers' time horizons
on their assessment of the value of future fuel savings. Specifically,
the table reports the value of fuel savings consumers might consider
when purchasing a MY 2025 car or light truck that features the higher
fuel economy levels required by the proposed rule, when those fuel
savings are evaluated over different time horizons. The table then
compares these values to the agency's estimates of the increases in
these vehicles' prices that are likely to result from the standards
proposed for MY 2025. This table shows that when fuel savings are
evaluated over the average lifetime of a MY 2025 car (approximately 14
years) or light truck (about 16 years), their present value (discounted
at 3 percent) exceeds the estimated average price increase by more than
$2,500 for cars and by over $4,500 for light trucks.
If buyers are instead assumed to consider fuel savings over only a
10-year time horizon, Table IV-112 shows that this reduces the
difference between the present value of fuel savings and the projected
price increase for a MY 2025 car to about $1,800, and to about $3,350
for a MY 2025 light truck. Finally, Table IV-112 shows that if buyers
consider fuel savings only over the length of time for which they
typically finance new car
[[Page 75329]]
purchases (slightly more than 5 years during 2011), the value of fuel
savings exceeds the estimated increase in the price of a MY 2025 car by
only about $200, while the corresponding difference is reduced to
slightly more than $1,200 for a MY 2025 light truck.
[GRAPHIC] [TIFF OMITTED] TP01DE11.158
Potential vehicle buyers may also discount future fuel savings
using higher rates than those typically used to evaluate Federal
regulations. OMB guidance prescribes that future benefits and costs of
regulations that mainly affect private consumption decisions, as will
be the case if manufacturers' costs for complying with higher fuel
economy standards are passed on to vehicle buyers, should be discounted
using a consumption rate of time preference.\811\ OMB estimates that
savers currently discount future consumption at an average real or
inflation-adjusted rate of about 3 percent when they face little risk
about its likely level, which makes it a reasonable estimate of the
consumption rate of time preference.
---------------------------------------------------------------------------
\811\ Office of Management and Budget, Circular A-4,
``Regulatory Analysis,'' September 17, 2003, 33. Available at http://www.whitehouse.gov/omb/assets/regulatory_matters_pdf/a-4.pdf
(last accessed Sept. 26, 2010).
---------------------------------------------------------------------------
However, vehicle buyers may view the value of future fuel savings
that results from purchasing a vehicle with higher fuel economy as
risky or uncertain, or they may instead discount future consumption at
rates reflecting their costs for financing the higher capital outlays
required to purchase more fuel-efficient models. In either case, buyers
comparing models with different fuel economy ratings are likely to
discount the future fuel savings from purchasing one that offers higher
fuel economy at rates well above the 3% assumed in NHTSA's evaluation.
Table IV-113 shows the effects of higher discount rates on vehicle
buyers' evaluation of the fuel savings projected to result from the
CAFE standards proposed in this NPRM, again using MY 2025 passenger
cars and light trucks as an example. As Table IV-112 showed previously,
average future fuel savings discounted at the OMB 3 percent consumer
rate exceed the agency's estimated price increases by more than $2,500
for MY 2025 passenger cars and by about $4,500 for MY 2025 light
trucks. If vehicle buyers instead discount future fuel savings at the
typical new-car loan rate prevailing during 2010 (approximately 5.2
percent), however, these differences decline to slightly more than
$2,000 for cars and $3,900 for light trucks, as Table IV-113
illustrates. This is a plausible alternative assumption, because buyers
are likely to finance the increases in purchase prices resulting from
compliance with higher CAFE standards as part of the process of
financing the vehicle purchase itself.
Finally, as the table also shows, discounting future fuel savings
using a consumer credit card rate (which averaged almost 14 percent
during 2010) reduces these differences to less than $900 for a MY 2025
passenger car and about $2,250 for the typical MY 2025 light truck.
Even at these significantly higher discount rates, however, the table
shows that the private net benefits from purchasing new vehicles with
the levels of fuel economy this rule would
[[Page 75330]]
require--rather than those that would result from simply extending the
MY 2016 CAFE standards to apply to future model years--remain large.
[GRAPHIC] [TIFF OMITTED] TP01DE11.000
Some evidence also suggests that vehicle buyers may employ
combinations of high discount rates and short time horizons in their
purchase decisions. For example, consumers surveyed by Kubik (2006)
reported that fuel savings would have to be adequate to pay back the
additional purchase price of a more fuel-efficient vehicle in less than
3 years to persuade them to purchase it, and that even over this short
time horizon they were likely to discount fuel savings using credit
card-like rates.\814\ Combinations of a shorter time horizon and a
higher discount rate could further reduce--or potentially even
eliminate--the difference between the value of fuel savings and the
agency's estimates of increases in vehicle prices. One plausible
combination would be for buyers to discount fuel savings over the term
of a new car loan, using the interest rate on that loan as a discount
rate. Doing so would reduce the amount by which future fuel savings
exceed the estimated increase in the prices of MY 2025 vehicles
considerably further, to about $117 for passenger cars and $1,250 for
light trucks.
---------------------------------------------------------------------------
\812\ Interest rates on 48-month new vehicle loans made by
commercial banks during 2010 averaged 6.21%, while new car loan
rates at auto finance companies averaged 4.26%; See Board of
Governors of the Federal Reserve System, Federal Reserve Statistical
Release G.19, Consumer Credit. Available at http://www.federalreserve.gov/releases/g19/Current (last accessed September
27, 2011).
\813\ The average rate on consumer credit card accounts at
commercial banks during 2010 was 13.78%; See Board of Governors of
the Federal Reserve System, Federal Reserve Statistical Release
G.19, Consumer Credit. Available at http://www.federalreserve.gov/releases/g19/Current (last accessed September 27, 2011).
\814\ Kubik, M. (2006). Consumer Views on Transportation and
Energy. Second Edition. Technical Report: National Renewable Energy
Laboratory. Available at Docket No. NHTSA-2009-0059-0038.
---------------------------------------------------------------------------
As these comparisons illustrate, reasonable alternative assumptions
about how consumers might evaluate future fuel savings, the major
private benefit from requiring higher fuel economy, can significantly
affect the benefits they consider when deciding whether to purchase
more fuel-efficient vehicles. Readily imaginable combinations of
shorter time horizons, higher discount rates, and lower expectations
about future fuel prices or annual vehicle use and fuel savings could
make potential buyers hesitant--or perhaps even unwilling--to purchase
vehicles offering the increased fuel economy levels this proposed rule
would require manufacturers to provide in future model years. Thus,
vehicle buyers' assessment of the benefits and costs of this proposal
in their purchase decisions may differ markedly from NHTSA's estimates.
[[Page 75331]]
If consumers' views about critical variables such as future fuel
prices or the appropriate discount rate differ sufficiently from the
assumptions used by the agency, some or perhaps many potential vehicle
buyers might conclude that the value of fuel savings and other benefits
from higher fuel economy they are considering are not sufficient to
justify the increase in purchase prices they expect to pay. In
conjunction with the possibility that manufacturers misinterpret
potential buyers' willingness to pay for improved fuel economy, this
might explain why the current choices among available models do not
result in average fuel economy levels approaching those this rule would
require.
Another possibility is that achieving the fuel economy improvements
required by stricter fuel economy standards might lead manufacturers to
forego planned future improvements in performance, carrying capacity,
safety, or other features of their vehicle models that provide
important sources of utility to their owners, even if it is
technologically feasible to have both improvements in those other
features and improved fuel economy. Although the specific economic
values that vehicle buyers attach to individual vehicle attributes such
as fuel economy, performance, passenger- and cargo-carrying capacity,
or other features are difficult to infer from vehicle prices or buyers'
choices among competing models, changes in vehicle attributes can
significantly affect the overall utility that vehicles offer to
potential buyers. Thus if requiring manufacturers to provide higher
fuel economy leads them to sacrifice improvements in these or other
highly-valued attributes, potential buyers are likely to view these
sacrifices as an additional cost of improving fuel economy. If those
attributes are of sufficient value, or if the range of vehicles offered
ensures that vehicles with those attributes will continue to be
offered, then vehicle buyers will still have the opportunity to choose
those attributes, though at increased cost compared to models without
the fuel economy improvements.
As indicated in its previous discussion of technology costs, NHTSA
has approached this potential problem by attempting to develop cost
estimates for fuel economy-improving technologies that include
allowances for any additional costs that would be necessary to maintain
the reference fleet (or baseline) levels of performance, comfort,
capacity, or safety of light-duty vehicle models to which those
technologies are applied. In doing so, the agency followed the
precedent established by the 2002 NAS Report on improving fuel economy,
which estimated ``constant performance and utility'' costs for
technologies that manufacturers could employ to increase the fuel
efficiency of cars or light trucks. Although NHTSA has revised its
estimates of manufacturers' costs for some technologies significantly
for use in this rulemaking, these revised estimates are still intended
to represent costs that would allow manufacturers to maintain the
performance, safety, carrying capacity, and utility of vehicle models
while improving their fuel economy, in the majority of cases. The
agency's continued specification of footprint-based CAFE standards also
addresses this concern, by establishing less demanding fuel economy
targets for larger cars and light trucks.
Finally, vehicle buyers may simply prefer the choices of vehicle
models they now have available to the combinations of price, fuel
economy, and other attributes that manufacturers are likely to offer
when required to achieve the higher overall fuel economy levels
proposed in this NPRM. This explanation assumes that auto makers decide
to change vehicle attributes other than price and fuel economy in
response to this rule. If this is the case, their choices among
models--and even some buyers' decisions about whether to purchase a new
vehicle--will respond accordingly, and their responses to these new
choices will reduce their overall welfare. Some may buy models with
combinations of price, fuel efficiency, and other attributes that they
consider less desirable than those they would otherwise have purchased,
while others may simply postpone buying a new vehicle. It leaves open
the question, though, why auto makers would change those other vehicle
characteristics if consumers liked them as they were; as noted, the
assumption of ``constant performance and utility'' built into the cost
estimates means that these changes are not necessary.
As the foregoing discussion makes clear, the agency cannot offer a
complete answer to the question of why the apparently large differences
between its estimates of private benefits from requiring higher fuel
economy and the costs of supplying it would not result in higher fuel
economy for new cars and light trucks in the absence of this rule. One
explanation is that these estimates are reasonable, but that for the
reasons outlined above, the market for fuel economy is not operating
efficiently. NHTSA believes the existing literature offers some support
for the view that various failures in the market for fuel economy
prevent it from providing an economically desirable outcome, which
implies that on balance there are likely to be substantial private
gains from the proposed rule. The agency will continue to investigate
new empirical literature addressing this question as it becomes
available, and seeks comment on all of the relevant questions.
NHTSA acknowledges the possibility that it has incorrectly
characterized the impact on the market of the CAFE standards this rule
proposes, and that this could cause its estimates of benefits and costs
to misrepresent the effects of the proposed rule. To recognize this
possibility, this section presents an alternative accounting of the
benefits and costs of CAFE standards for MYs 2017-2025 passenger cars
and light trucks and discusses its implications. Table IV-114 displays
the economic impacts of the rule as viewed from the perspective of
potential buyers.
As the table shows, the proposed rule's total benefits to vehicle
buyers (line 4) consist of the value of fuel savings over vehicles'
full lifetimes at retail fuel prices (line 1), the economic value of
vehicle occupants' savings in refueling time (line 2), and the economic
benefits from added rebound-effect driving (line 3). As the zero
entries in line 5 of the table suggest, no losses in consumer welfare
from changes in vehicle attributes (other than those from increases in
vehicle prices) are assumed to occur. Thus there is no reduction in the
total private benefits to vehicle owners, so that net private benefits
to vehicle buyers (line 6) are equal to total private benefits
(reported previously in line 4).
As Table IV-114 also shows, the decline in fuel tax revenues (line
7) that results from reduced fuel purchases is a transfer of funds
between consumers and government and is thus not a social cost.\815\
(Thus the sum of lines 1 and 7 equals the savings in fuel production
costs that were reported previously as the value of fuel savings at
pre-tax prices in the agency's previous accounting of benefits and
costs.) Lines 8 and 9 of Table IV-114 report the value of reductions in
air pollution and climate-related externalities resulting from lower
emissions of criteria air
[[Page 75332]]
pollutants and GHGs during fuel production and consumption, while line
10 reports the savings in energy security externalities to the U.S.
economy from reduced consumption and imports of petroleum and refined
fuel. Line 12 reports the costs of increased congestion delays,
accidents, and noise that result from additional driving due to the
fuel economy rebound effect. Net external benefits from the proposed
CAFE standards (line 13) are thus the sum of the change in fuel tax
revenues, the reduction in environmental and energy security
externalities, and increased external costs from added driving.
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\815\ Strictly speaking, fuel taxes represent a transfer of
resources from consumers of fuel to government agencies and not a
use of economic resources. Reducing the volume of fuel purchases
simply reduces the value of this transfer, and thus cannot produce a
real economic cost or benefit. Representing the change in fuel tax
revenues in effect as an economy-wide cost is necessary to offset
the portion of fuel savings included in line 1 that represents
savings in fuel tax payments by consumers. This prevents the savings
in tax revenues from being counted as a benefit from the economy-
wide perspective.
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Line 14 of Table IV-114 shows manufacturers' technology outlays for
meeting higher CAFE standards for passenger cars and light trucks,
which represent the principal private and social cost of requiring
higher fuel economy. The net social benefits (line 15 of the table)
resulting from the proposed rule consist of the sum of private (line 6)
and external (line 13) benefits, minus technology costs (line 14). As
expected, the figures reported in line 15 of the table are identical to
those reported previously in Table IV-63.
Table IV-114 highlights several important features of this rule's
economic impacts. First, comparing the rule's net private (line 6) and
external (line 13) benefits makes it clear that a very large proportion
of the proposed rule's benefits would be experienced by vehicle buyers,
while the small remaining fraction would be experienced throughout the
remainder of the U.S. economy. In turn, the vast majority of private
benefits resulting from the higher fuel economy levels the proposed
rule would require stem from fuel savings to vehicle buyers. Net
external benefits from the proposed rule are expected to be small,
because the value of reductions in environmental and energy security
externalities is likely almost exactly offset by the increased costs
associated with added vehicle use. As a consequence, the net social
benefits of the rule mirror almost exactly its net private benefits to
vehicle buyers, under the assumption that manufacturers will recover
their technology outlays for achieving higher fuel economy by raising
new car and light truck prices. Once again, this result highlights the
extreme importance of accounting for any other effects of the rule on
the economic welfare of vehicle buyers.
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[GRAPHIC] [TIFF OMITTED] TP01DE11.274
[[Page 75334]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.275
As discussed in detail previously, NHTSA believes that the
aggregate benefits from this proposed rule amply justify its total
costs, but it remains possible that the agency has overestimated the
role of fuel savings to
[[Page 75335]]
buyers and subsequent owners of the cars and light trucks to which the
higher CAFE standards it proposes would apply. It is also possible that
the agency has failed to develop cost estimates that do not require
manufacturers to make changes in vehicle attributes as part of their
efforts to achieve higher fuel economy. To acknowledge these
possibilities, NHTSA has examined their potential impact on its
estimates of the proposed rule's benefits and costs. This analysis,
which appears in Chapter VIII of the Preliminary RIA accompanying this
proposed rule, shows the rule's economic impacts under alternative
assumptions about the private benefits from higher fuel economy, and
the value of potential changes in other vehicle attributes. One
conclusion is that even if the private savings are significantly
overstated, the benefits of the proposed standards continue to exceed
the costs. We seek comment on that analysis and the discussion above.
7. What other impacts (quantitative and unquantifiable) will these
proposed standards have?
In addition to the quantified benefits and costs of fuel economy
standards, the final standards will have other impacts that we have not
quantified in monetary terms. The decision on whether or not to
quantify a particular impact depends on several considerations:
How likely is it to occur, and can the magnitude of the
impact reasonably be attributed to the outcome of this rulemaking?
Would quantification of its physical magnitude or economic
value help NHTSA and the public evaluate the CAFE standards that may be
set in rulemaking?
Is the impact readily quantifiable in physical terms?
If so, can it readily be translated into an economic
value?
Is this economic value likely to be material?
Can the impact be quantified with a sufficiently narrow
range of uncertainty so that the estimate is useful?
NHTSA expects that this rulemaking will have a number of genuine,
material impacts that have not been quantified due to one or more of
these considerations. In some cases, further research may yield
estimates that are useful for future rulemakings.
Technology Forcing
The proposed rule will improve the fuel economy of the U.S. new
vehicle fleet, but it will also increase the cost (and presumably, the
price) of new passenger cars and light trucks built during MYs 2017-
2025. We anticipate that the cost, scope, and duration of this rule, as
well as the steadily rising standards it requires, will cause
automakers and suppliers to devote increased attention to methods of
improving vehicle fuel economy.
This increased attention will stimulate additional research and
engineering, and we anticipate that, over time, innovative approaches
to reducing the fuel consumption of light duty vehicles will emerge.
These innovative approaches may reduce the cost of the proposed rule in
its later years, and also increase the set of feasible technologies in
future years. We have attempted to estimate the effect of learning
effects on the costs of producing known technologies within the period
of the rulemaking, which is one way that technologies become cheaper
over time, and may reflect innovations in application and use of
existing technologies to meet the proposed future. However, we have not
attempted to estimate the extent to which not-yet-invented technologies
will appear, either within the time period of the current rulemaking or
that might be available after MY 2016, or whether technologies
considered but not applied in the current rulemaking, due to concern
about the likelihood of their commercialization in the rulemaking
timeframe, will in fact be helped towards commercialization as a result
of the proposed standards. NHTSA seeks comment on whether there are
quantifiable costs and benefits associated with the potential
technology forcing effects of the proposed standards, and if so, how
the agency should consider attempting to account for them in the final
rule analysis.
Effects on Vehicle Costs
Actions that increases the cost of new vehicles could subsequently
make such vehicles more costly to maintain, repair, and insure. In
general, NHTSA expects that this effect to be a positive linear
function of vehicle costs. In its central analysis, NHTSA estimates
that the proposed rule could raise average vehicle technology costs by
over $1,800 by 2025, and for some manufacturers, average costs will
increase by more than $3,000 (for some specific vehicle models, we
estimate that the proposed rule could increase technology costs by more
than $10,000). Depending on the retail price of the vehicle, this could
represent a significant increase in the overall vehicle cost and
subsequently increase insurance rates, operation costs, and maintenance
costs. Comprehensive and collision insurance costs are likely to be
directly related to price increases, but liability premiums will go up
by a smaller proportion because the bulk of liability coverage reflects
the cost of personal injury. Also, although they represent economic
transfers, sales and excise taxes would also increase with increases in
vehicle prices (unless rates are reduced). The impact on operation and
maintenance costs is less clear, because the maintenance burden and
useful life of each technology are not known. However, one of the
common consequences of using more complex or innovative technologies is
a decline in vehicle reliability and an increase in maintenance costs.
These costs are borne in part by vehicle manufacturers (through
warranty costs, which are included in the indirect costs of
production), and in part by vehicle owners. NHTSA believes that this
effect is difficult to quantify for purposes of this proposed rule, but
we seek comment on how we might attempt to do so for the final rule.
Related, to the extent that the proposed standards require
manufacturers to build and sell more PHEVs and EVs, vehicle
manufacturers and owners may face additional costs for charging
infrastructure and battery disposal. While Chapter 3 of the draft Joint
TSD discusses the costs of charging infrastructure, neither of these
costs have been incorporated into the rulemaking analysis due to time
constraints. We intend to attempt to quantify these additional costs
for the final rule stage, but we believe that doing so will be
difficult and we seek comment on how we might go about it. We also seek
comment on other costs or cost savings that are not accounted for in
this analysis and how we might go about quantifying them for the final
rule.
And finally on the subject of vehicle operation, NHTSA has received
comments in the past that premium (higher octane) fuel may be necessary
if certain advanced fuel economy-improving technologies are required by
stringent CAFE standards. The agencies have not assumed in our
development of technology costs that premium fuel would be required. We
seek comment on this assumption.
Effects on Vehicle Miles Traveled (VMT)
While NHTSA has estimated the impact of the rebound effect on the
use of MY 2017-25 vehicles, we have not estimated how a change in new
vehicle sales would impact aggregate vehicle use. Changes in new
vehicle sales may be accompanied by complex but
[[Page 75336]]
difficult-to-quantify effects on overall vehicle use and its
composition by vehicle type and age, because the same factors affecting
sales of new vehicles are also likely to influence their use, as well
as how intensively older vehicles are used and when they are retired
from service. These changes may have important consequences for total
fleet-wide fuel consumption. NHTSA believes that this effect is
difficult to quantify for purposes of this proposed rule, but we seek
comment on how we might attempt to do so for the final rule, if
commenters agree that attempting quantification of this effect could be
informative.
Effect on Composition of Passenger Car and Light Truck Sales
To the extent that manufacturers pass on costs to buyers by raising
prices for new vehicle models, they may distribute these price
increases across their model lineups in ways that affect the
composition of their total sales. To the extent that changes in the
composition of sales occur, this could affect fuel savings to some
degree. However, NHTSA's view is that the scope for such effects is
relatively small, since most vehicles will to some extent be impacted
by the standards. Compositional effects might be important with respect
to compliance costs for individual manufacturers, but are unlikely to
be material for the rule as a whole.
NHTSA is continuing to develop methods of estimating the effects of
these proposed standards on the sales of individual vehicle models, and
plans to apply these methods in analyzing the impacts of its final CAFE
standards for MY 2017-25. In the meantime, the agency seeks comment on
the possibility that significant shifts in the composition of new
vehicle sales by type or model could occur, the potential effects of
such shifts on fuel consumption and fuel savings from the proposed
standards, and methods for analyzing the potential extent and patterns
of shifts in sales.
Effects on the Used Vehicle Market
The effect of this rule on the lifetimes, use, and retirement dates
(``scrappage'') of older vehicles will be related to its effects on new
vehicle prices, the fuel efficiency of new vehicle models, and total
sales of new vehicles. If the value of fuel savings resulting from
improved fuel efficiency to the typical potential buyer of a new
vehicle outweighs the average increase in new models' prices, sales of
new vehicles will rise, while scrappage rates of used vehicles will
increase slightly. This will cause the ``turnover'' of the vehicle
fleet--that is, the retirement of used vehicles and their replacement
by new models--to accelerate slightly, thus accentuating the
anticipated effect of the rule on fleet-wide fuel consumption and
CO2 emissions. However, if potential buyers value future
fuel savings resulting from the increased fuel efficiency of new models
at less than the increase in their average selling price, sales of new
vehicles will decline, as will the rate at which used vehicles are
retired from service. This effect will slow the replacement of used
vehicles by new models, and thus partly offset the anticipated effects
of the final rules on fuel use and emissions.
Because the agencies are uncertain about how the value of projected
fuel savings from the final rules to potential buyers will compare to
their estimates of increases in new vehicle prices, we have not
attempted to estimate explicitly the effects of the rule on scrappage
of older vehicles and the turnover of the vehicle fleet.
Impacts of Changing Fuel Composition on Costs, Benefits, and Emissions
EPAct, as amended by EISA, creates a Renewable Fuels Standard that
sets targets for greatly increased usage of renewable fuels over the
next decade. The law requires fixed volumes of renewable fuels to be
used--volumes that are not linked to actual usage of transportation
fuels.
Ethanol and biodiesel (in the required volumes) may increase or
decrease the cost of blended gasoline and diesel, depending on crude
oil prices and tax subsidies offered for renewable fuels. The potential
extra cost of renewable fuels would be borne through a cross-subsidy:
the price of every gallon of blended gasoline could rise sufficiently
to pay for any extra cost of using renewable fuels in these blends.
However, if the price of gasoline or diesel increases enough, the
consumer could actually realize a savings through the increased usage
of renewable fuels. By reducing total fuel consumption, the CAFE
standards proposed in this rule could tend to increase any necessary
cross-subsidy per gallon of fuel, and hence raise the market price of
transportation fuels, while there would be no change in the volume or
cost of renewable fuels used.
These effects are indirectly incorporated in NHTSA's analysis of
the proposed CAFE rule because they are reflected in EIA's projections
of future gasoline and diesel prices in the Annual Energy Outlook,
which incorporates in its baseline both a Renewable Fuel Standard and
an CAFE standards.
The net effect of incorporating an RFS then might be to slightly
reduce the benefits of the rule because affected vehicles might be
driven slightly less if the RFS makes blended gasoline relatively more
expensive, and because fuels blended with more ethanol emit slightly
fewer greenhouse gas emissions per gallon. In addition, there might be
corresponding benefit losses from the induced reduction in VMT. All of
these effects are difficult to estimate, because of uncertainty in
future crude oil prices, uncertainty in future tax policy, and
uncertainty about how petroleum marketers will actually comply with the
RFS, but they are likely to be small, because the cumulative deviation
from baseline fuel consumption induced by the final rule will itself be
small.
Distributional Effects
The agency's analysis of the proposed rule reports impacts only as
nationwide aggregate or per-vehicle average values. NHTSA also shows
the effects of the EIA high and low fuel price forecasts on the
aggregate benefits in its sensitivity analysis. Generally, this
proposed rule would have its largest effects on individuals who
purchase new vehicles produced during the model years it would affect
(2017-25). New vehicle buyers who drive more than the agency's
estimates of average vehicle use will experience larger fuel savings
and economic benefits than the average values reported in this NPRM,
while those who drive less than our average estimates will experience
smaller fuel savings and benefits. NHTSA believes that this effect is
difficult to quantify for purposes of this proposed rule, but we seek
comment on how we might attempt to do so for the final rule, if
commenters agree that attempting quantification of this effect could be
informative.
H. Vehicle Classification
Vehicle classification, for purposes of the CAFE program, refers to
whether NHTSA considers a vehicle to be a passenger car or a light
truck, and thus subject to either the passenger car or the light truck
standards.\816\ As NHTSA explained in the MY 2011 rulemaking and in the
MYs 2012-2016 rulemaking, vehicle classification is based in part on
EPCA/EISA, and in part on NHTSA's regulations. EPCA categorizes some
light 4-wheeled vehicles as ``passenger automobiles'' (cars) and the
balance as ``non-passenger automobiles'' (light trucks). EPCA defines
passenger
[[Page 75337]]
automobiles as any automobile (other than an automobile capable of off-
highway operation) which NHTSA decides by rule is manufactured
primarily for use in the transportation of not more than 10
individuals.\817\ NHTSA created regulatory definitions for passenger
automobiles and light trucks, found at 49 CFR Part 523, to guide the
agency and manufacturers in classifying vehicles.
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\816\ For the purpose of the MYs 2012-2016 standards and this
NPRM for the MYs 2017-2025 standards, EPA has agreed to use NHTSA's
regulatory definitions for determining which vehicles would be
subject to which CO2 standards.
\817\ EPCA 501(2), 89 Stat. 901, codified at 49 U.S.C. 32901(a).
---------------------------------------------------------------------------
Under EPCA, there are two general groups of automobiles that
qualify as non-passenger automobiles or light trucks: (1) Those defined
by NHTSA in its regulations as other than passenger automobiles due to
their having design features that indicate they were not manufactured
``primarily'' for transporting up to ten individuals; and (2) those
expressly excluded from the passenger category by statute due to their
capability for off-highway operation, regardless of whether they might
have been manufactured primarily for passenger transportation.\818\ 49
CFR 523 directly tracks those two broad groups of non-passenger
automobiles in subsections (a) and (b), respectively. We note that
NHTSA tightened the definition of light truck in the MY 2011 rulemaking
to ensure that only vehicles that actually have 4WD will be classified
as off-highway vehicles by reason of having 4WD (to prevent 2WD SUVs
that also come in a 4WD ``version'' from qualifying automatically as
``off-road capable'' simply by reason of the existence of the 4WD
version), which resulted in the reclassification of over 1 million
vehicles from the truck fleet to the car fleet.
---------------------------------------------------------------------------
\818\ 49 U.S.C. 32901(a)(18). The statute refers both to
vehicles that are 4WD and to vehicles over 6,000 lbs GVWR as
potential candidates for off-road capability, if they also meet the
``significant feature * * * designed for off-highway operation'' as
defined by the Secretary. We note that we consider ``AWD'' vehicles
as 4WD for purposes of this determination--they send power to all
wheels of the vehicle all the time, while 4WD vehicles may only do
so part of the time, which appears to make them equal candidates for
off-road capability given other necessary characteristics. We also
underscore, as we have in the past, that despite comments in prior
rulemakings suggesting that any vehicle that appears to be
manufactured ``primarily'' for transporting passengers must be
classified as a passenger car, the statute as currently written
clearly provides that vehicles that are off-highway capable are not
passenger cars.
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Since the original passage of EPCA, and consistently through the
passage of EISA, Congress has expressed its intent that different
vehicles with different characteristics and capabilities should be
subject to different CAFE standards in two ways: first, through whether
a vehicle is classified as a passenger car or as a light truck, and
second, by requiring NHTSA to set separate standards for passenger cars
and for light trucks.\819\ Creating two categories of vehicles and
requiring separate standards for each, however, can lead to two issues
which may either detract from the fuel savings that the program is able
to achieve, or increase regulatory burden for manufacturers simply
because they are trying to meet market demand. Specifically,
---------------------------------------------------------------------------
\819\ See, e.g., discussion of legislative history in 42 FR
38362, 38365-66 (Jul. 28, 1977).
---------------------------------------------------------------------------
(1) If the stringency of the standards that NHTSA establishes seems
to favor either cars or trucks, manufacturers may have incentive to
change their vehicles' characteristics in order to reclassify them and
average them into the ``easier'' fleet; and
(2) ``Like'' vehicles, such as the 2WD and 4WD versions of the same
CUV, may have generally similar fuel economy-achieving capabilities,
but different targets due to differences in the car and truck curves.
NHTSA recognizes that manufacturers may have an incentive to
classify vehicles as light trucks if the fuel economy target for light
trucks with a given footprint is less stringent than the target for
passenger cars with the same footprint. This is often the case given
the current fleet. Because of characteristics like 4WD and towing and
hauling capacity (and correspondingly, although not necessarily,
heavier weight), the vehicles in the current light truck fleet are
generally less capable of achieving higher fuel economy levels as
compared to the vehicles in the passenger car fleet. 2WD SUVs are the
vehicles that could be most readily redesigned so that they can be
``moved'' from the passenger car to the light truck fleet. A
manufacturer could do this by adding a third row of seats, for example,
or boosting GVWR over 6,000 lbs for a 2WD SUV that already meets the
ground clearance requirements for ``off-road capability.'' A change
like this may only be possible during a vehicle redesign, but since
vehicles are redesigned, on average, every 5 years, at least some
manufacturers could possibly choose to make such changes before or
during the model years covered by this rulemaking, either because of
market demands or because of interest in changing the vehicle's
classification.
NHTSA continues to believe that the definitions as they currently
exist are consistent with the text of EISA and with Congress' original
intent. However, the time frame of this rulemaking is longer than any
CAFE rulemaking that NHTSA has previously undertaken, and no one can
predict with certainty how the market will change between now and 2025.
The agency therefore has less assurance than in prior rulemakings that
manufacturers will not have greater incentives and opportunities during
that time frame to make more deliberate redesign efforts to move
vehicles out of the car fleet and into the truck fleet in order to
obtain the lower target, and potentially reducing overall fuel savings.
Recognizing this possibility, we seek comment on how best to avoid it
while still classifying vehicles appropriately based on their
characteristics and capabilities.
One of the potential options that we explored in the MYs 2012-2016
rulemaking for MYs 2017 and beyond was changing the definition of light
truck to remove paragraph (5) of 49 CFR 523.5(a), which allows vehicles
to be classified as light trucks if they have three or more rows of
seats that can either be removed or folded flat to allow greater cargo-
carrying capacity. NHTSA has received comments in the past arguing that
vehicles with three or more rows of seats, unless they are capable of
transporting more than 10 individuals, should be classified as
passenger cars rather than as light trucks because they would not need
to have so many seats if they were not intended primarily to carry
passengers.
NHTSA recognizes that there are arguments both for and against
maintaining the definition as currently written for MYs 2017 and
beyond. The agency continues to believe that three or more rows of
seats that can be removed or folded flat is a reasonable proxy for a
vehicle's ability to provide expanded cargo space, consistent with the
agency's original intent in developing the light truck definitions that
expanded cargo space is a fundamentally ``truck-like'' characteristic.
Much of the public reaction to this definition, which is mixed, tends
to be visceral and anecdotal--for example, for parents with minivans
and multiple children, the ability of seats to fold flat to provide
more room for child-related cargo may have been a paramount
consideration in purchasing the vehicle, while for CUV owners with
cramped and largely unused third rows, those extra seats may seem to
have sprung up entirely in response to the regulation, rather than in
response to the consumer's need for utility. If we believe, for the
sake of argument, that the agency's decision might be reasonable from
both a policy and a legal perspective whether we decided to change the
definition or to leave it alone, the most important questions in making
the decision become (1) whether removing
[[Page 75338]]
523.5(a)(5), and thus causing vehicles with three or more rows to be
classified as passenger cars in the future, will save more fuel, and
(2) if more fuel will be saved, at what cost.
In considering these questions in the MYs 2012-2016 rulemaking,
NHTSA conducted an analysis in the final rule to attempt to consider
the impact of moving these vehicles. We identified all of the 3-row
vehicles in the baseline (MY 2008) fleet,\820\ and then considered
whether any could be properly classified as a light truck under a
different provision of 49 CFR 523.5--about 40 vehicles were
classifiable under Sec. 523.5(b) as off-highway capable. We then
transferred those remaining 3-row vehicles from the light truck to the
passenger car input sheets for the CAFE model, re-estimated the
relative stringency of the passenger car and light truck standards,
shifted the curves to obtain the same overall average required fuel
economy as under the final standards, and ran the model to evaluate
potential impacts (in terms of costs, fuel savings, etc.) of moving
these vehicles. The agency's hypothesis had been that moving 3-row
vehicles from the truck to the car fleet would tend to bring the
achieved fuel economy levels down in both fleets--the car fleet
achieved levels could theoretically fall due to the introduction of
many more vehicles that are relatively heavy for their footprint and
thus comparatively less fuel economy-capable, while the truck fleet
achieved levels could theoretically fall due to the characteristics of
the vehicles remaining in the fleet (4WDs and pickups, mainly) that are
often comparatively less fuel economy-capable than 3-row vehicles,
although more vehicles would be subject to the relatively more
stringent passenger car standards, assuming the curves were not refit
to the data.
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\820\ Of the 430 light truck models in the fleet, 175 of these
had 3 rows.
---------------------------------------------------------------------------
As the agency found, however, moving the vehicles reduced the
stringency of the passenger car standards by approximately 0.8 mpg on
average for the five years of the rule, and reduced the stringency of
the light truck standards by approximately 0.2 mpg on average for the
five years of the rule, but it also resulted in approximately 676
million fewer gallons of fuel consumed (equivalent to about 1 percent
of the reduction in fuel consumption under the final standards) and 7.1
mmt fewer CO2 emissions (equivalent to about 1 percent of
the reduction in CO2 emissions under the final standards)
over the lifetime of the MYs 2012-2016 vehicles. This result was
attributable to slight differences (due to rounding precision) in the
overall average required fuel economy levels in MYs 2012-2014, and to
the retention of the relatively high lifetime mileage accumulation
(compared to ``traditional'' passenger cars) of the vehicles moved from
the light truck fleet to the passenger car fleet. The net effect on
technology costs was approximately $200 million additional spending on
technology each year (equivalent to about 2 percent of the average
increase in annual technology outlays under the final standards).
Assuming manufacturers would pass that cost forward to consumers by
increasing vehicle costs, NHTSA estimated that vehicle prices would
increase by an average of approximately $13 during MYs 2012-2016. With
less fuel savings and higher costs, and a substantial disruption to the
industry, removing 523.5(a)(5) did not seem advisable in the context of
the MYs 2012-2016 rulemaking.
Looking forward, however, and given the considerable uncertainty
regarding the incentive to reclassify vehicles in the MYs 2017 and
beyond timeframe, the agency considered whether a fresh attempt at this
analysis would be warranted, but did not believe that it would be
informative given the uncertainty. One important point to note in the
comparative analysis in the MYs 2012-2016 rulemaking is that, due to
time constraints, the agency did not attempt to refit the respective
fleet target curves or to change the intended required stringency in MY
2016 of 34.1 mpg for the combined fleets. If we had refitted curves,
considering the vehicles in question, we might have obtained a somewhat
steeper passenger car curve, and a somewhat flatter light truck curve,
which could have affected the agency's findings. The same is true
today. Without refitting the curves and changing the required levels of
stringency for cars and trucks, simply moving vehicles from one fleet
to another will not inform the agency in any substantive way as to the
impacts of a change in classification. Moreover, even if we did attempt
to make those changes, the results would be somewhat speculative; for
example, the agencies continue to use the same MY 2008 baseline used in
the MYs 2012-2016 rulemaking, which may have limited utility for
predicting relatively small changes (moving only 40 vehicles, as noted
above) in the fleet makeup during the rulemaking timeframe. As a
result, NHTSA did not attempt to quantify the impact of such a
reclassification of 3-row vehicles, but we seek comment on whether and
how we should do so for the final rule. If commenters believe that we
should attempt to quantify the impact, we specifically seek comment on
how to refit the footprint curves and how the agency should consider
stringency levels under such a scenario.
Another potential option that we explored in the MYs 2012-2016
rulemaking for MYs 2017 and beyond was classifying ``like'' vehicles
together. Many commenters objected in the rulemaking for the MY 2011
standards to NHTSA's regulatory separation of ``like'' vehicles.
Industry commenters argued that it was technologically inappropriate
for NHTSA to place 4WD and 2WD versions of the same SUV in separate
classes. They argued that the vehicles are the same, except for their
drivetrain features, thus giving them similar fuel economy improvement
potential. They further argued that all SUVs should be classified as
light trucks. Environmental and consumer group commenters, on the other
hand, argued that 4WD SUVs and 2WD SUVs that are ``off-highway
capable'' by virtue of a GVWR above 6,000 pounds should be classified
as passenger cars, since they are primarily used to transport
passengers. In the MY 2011 rulemaking, NHTSA rejected both of these
sets of arguments. NHTSA concluded that 2WD SUVs that were neither
``off-highway capable'' nor possessed ``truck-like'' functional
characteristics were appropriately classified as passenger cars. At the
same time, NHTSA also concluded that because Congress explicitly
designated vehicles with GVWRs over 6,000 pounds as ``off-highway
capable'' (if they meet the ground clearance requirements established
by the agency), NHTSA did not have authority to move these vehicles to
the passenger car fleet.
NHTSA continues to believe that this would not be an appropriate
solution for addressing either the risk of gaming or perceived
regulatory inequity going forward. As explained in the MYs 2012-2016
final rule, with regard to the first argument, that ``like'' vehicles
should be classified similarly (i.e., that 2WD SUVs should be
classified as light trucks because, besides their drivetrain, they are
``like'' the 4WD version that qualifies as a light truck), NHTSA
continues to believe that 2WD SUVs that do not meet any part of the
existing regulatory definition for light trucks should be classified as
passenger cars. However, NHTSA recognizes the additional point raised
by industry commenters in the MY 2011 rulemaking that manufacturers may
respond to this tighter classification by ceasing to build 2WD versions
of SUVs, which could
[[Page 75339]]
reduce fuel savings. In response to that point, NHTSA stated in the MY
2011 final rule that it expects that manufacturer decisions about
whether to continue building 2WD SUVs will be driven in much greater
measure by consumer demand than by NHTSA's regulatory definitions. If
it appears, in the course of the next several model years, that
manufacturers are indeed responding to the CAFE regulatory definitions
in a way that reduces overall fuel savings from expected levels, it may
be appropriate for NHTSA to review this question again. At this time,
however, since so little time has passed since our last rulemaking
action, we do not believe that we have enough information about changes
in the fleet to ascertain whether this is yet ripe for consideration.
We seek comment on how the agency might go about reviewing this
question as more information about manufacturer behavior is accumulated
over time.
I. Compliance and Enforcement
1. Overview
NHTSA's CAFE enforcement program is largely established by
statute--unlike the CAA, EPCA, as amended by EISA, is very prescriptive
with regard to enforcement. EPCA and EISA also clearly specify a number
of flexibilities that are available to manufacturers to help them
comply with the CAFE standards. Some of those flexibilities are
constrained by statute--for example, while Congress required that NHTSA
allow manufacturers to transfer credits earned for over-compliance from
their car fleet to their truck fleet and vice versa, Congress also
limited the amount by which manufacturers could increase their CAFE
levels using those transfers.\821\ NHTSA believes Congress balanced the
energy-saving purposes of the statute against the benefits of certain
flexibilities and incentives and intentionally placed some limits on
certain statutory flexibilities and incentives. With that goal in mind,
of maximizing compliance flexibility while also implementing EPCA/
EISA's overarching purpose of energy conservation as fully as possible,
NHTSA has done its best in crafting the credit transfer and trading
regulations authorized by EISA to ensure that total fuel savings are
preserved when manufacturers exercise their statutorily-provided
compliance flexibilities.
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\821\ See 49 U.S.C. 32903(g).
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Furthermore, to achieve the level of standards described in this
proposal for the 2017-2025 program, NHTSA expects automakers to
continue increasing the use of innovative and advanced technologies as
they evolve. Additional incentive programs may encourage early adoption
of these innovative and advanced technologies and help to maximize both
compliance flexibility and energy conservation. These incentive
programs for CAFE compliance would not be under NHTSA's EPCA/EISA
authority, but under EPA's EPCA authority--as discussed in more detail
below and in Section III of this preamble, EPA measures and calculates
manufacturer compliance with the CAFE standards, and it would be in the
calculation of fuel economy levels that additional incentives would
most appropriately be applied, as a practical matter. Specifically, to
be included in the CAFE program, EPA is proposing: (1) Fuel economy
performance adjustments due to improvements in air conditioning system
efficiency; (2) utilization of ``game changing'' technologies installed
on full size pick-up trucks including hybridization; and (3)
installation of ``off-cycle'' technologies. In addition, for model
years 2020 and later, EPA is proposing calculation methods for dual-
fueled vehicles, to fill the gap left in EPCA/EISA by the expiration of
the dual-fuel incentive. A more thorough description of the basis for
the new incentive programs can be found in Section III.
The following sections explain how NHTSA determines whether
manufacturers are in compliance with the CAFE standards for each model
year, and how manufacturers may address potential non-compliance
situations through the use of compliance flexibilities or fine payment.
The following sections also explain, for the reader's reference, the
proposed new incentives and calculations, but we also refer readers to
Section III.C for EPA's explanation of its authority and more specific
detail regarding these proposed changes to the CAFE program.
2. How does NHTSA determine compliance?
a. Manufacturer Submission of Data and CAFE Testing by EPA
NHTSA begins to determine CAFE compliance by reviewing projected
estimates in pre- and mid-model year reports submitted by manufacturers
pursuant to 49 CFR part 537, Automotive Fuel Economy Reports.\822\
Those reports for each compliance model year are submitted to NHTSA by
December of the calendar year prior to the corresponding subsequent
model year (for the pre-model year report) and in July of the given
model year (for the mid-model year report). NHTSA has already received
pre-and mid-model year reports from manufacturers for MY 2011. NHTSA
uses these reports for reference to help the agency, and the
manufacturers who prepare them, anticipate potential compliance issues
as early as possible, and help manufacturers plan compliance
strategies. NHTSA also uses the reports for auditing and testing
purposes, which helps manufacturers correct errors prior to the end of
the model year and facilitates acceptance of their final CAFE report by
EPA. In addition, NHTSA issues reports to the public twice a year that
provide a summary of manufacturers' fleet fuel economy projected
performances using pre- and mid model year data. Currently, NHTSA
receives manufacturers' CAFE reports in paper form. In order to
facilitate submission by manufacturers, NHTSA amended part 537 to allow
for electronic submission of the pre- and mid-model year CAFE reports
in 2010 (see 75 FR 25324). Electronic reports are optional and must be
submitted in a pdf format. NHTSA proposes to modify these provisions in
this NPRM, as described below, in order to eliminate hardcopy
submissions and help the agency more readily process and utilize the
electronically-submitted data.
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\822\ 49 CFR part 537 is authorized by 49 U.S.C. 32907.
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Throughout the model year, NHTSA audits manufacturers' reports and
conducts vehicle testing to confirm the accuracy of track width and
wheelbase measurements as a part of its footprint validation
program,\823\ which helps the agency understand better how
manufacturers may adjust vehicle characteristics to change a vehicle's
footprint measurement, and thus its fuel economy target. NHTSA resolve
discrepancies with the manufacturer prior to the end of the calendar
year corresponding to the respective model year with the primary goal
of manufacturers submitting accurate final reports to EPA. NHTSA makes
its ultimate determination of a manufacturer's CAFE compliance
obligation based on official reported and verified CAFE data received
from EPA. Pursuant to 49 U.S.C. 32904(e), EPA is responsible for
calculating manufacturers' CAFE values so that NHTSA can determine
compliance with its CAFE standards. The EPA-verified data is based on
any considerations from NHTSA testing, its own vehicle testing, and
final model year data
[[Page 75340]]
submitted by manufacturers to EPA pursuant to 40 CFR 600.512. A
manufacturer's final model year report must be submitted to EPA no
later than 90 days after December 31st of the model year. EPA test
procedures including those used to establish the new incentive fuel
economy performance values for model year 2017 to 2025 vehicles are
contained in sections 40 CFR Part 600 and 40 CFR Part 86.
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\823\ See http://www.nhtsa.gov/DOT/NHTSA/Vehicle%20Safety/Test%20Procedures/Associated%20Files/TP-537-01.pdf
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b. NHTSA Then Analyzes EPA-Certified CAFE Values for Compliance
NHTSA's determination of CAFE compliance is fairly straightforward:
after testing, EPA verifies the data submitted by manufacturers and
issues final CAFE reports sent to manufacturers and to NHTSA in a pdf
format between April and October of each year (for the previous model
year), and NHTSA then identifies the manufacturers' compliance
categories (fleets) that do not meet the applicable CAFE fleet
standards. NHTSA plans to construct a new, more automated database
system in the near future to store manufacturer data and the EPA data.
The new database is expected to simplify data submissions to NHTSA,
improve the quality of the agency's data, expedite public reporting,
improve audit verifications and testing, and enable more efficient
tracking of manufacturers' CAFE credits with greater transparency.
NHTSA uses the verified data from EPA to compare fleet average
standards with performance. A manufacturer complies with NHTSA's fuel
economy standard if its fleet average performance is greater than or
equal to its required standard, or if it is able to use available
compliance flexibilities to resolve its non-compliance difference.
NHTSA calculates a cumulative credit status for each of a
manufacturer's vehicle compliance categories according to 49 U.S.C.
32903. If a manufacturer's compliance category exceeds the applicable
fuel economy standard, NHTSA adds credits to the account for that
compliance category. The amount of credits earned in a given year are
determined by multiplying the number of tenths of an mpg by which a
manufacturer exceeds a standard for a particular category of
automobiles by the total volume of automobiles of that category
manufactured by the manufacturer for that model year. Credits may be
used to offset shortfalls in other model years, subject to the three
year ``carry-back'' and five-year ``carry-forward'' limitations
specified in 49 U.S.C. 32903(a); NHTSA does not have authority to allow
credits to be carried forward or back for periods longer than that
specified in the statute. A manufacturer may also transfer credits to
another compliance category, subject to the limitations specified in 49
U.S.C. 32903(g)(3), or trade them to another manufacturer. The value of
each credit received via trade or transfer, when used for compliance,
is adjusted using the adjustment factor described in 49 CFR 536.4,
pursuant to 49 U.S.C. 32903(f)(1). As part of this rulemaking, NHTSA is
proposing to set the VMT values that are part of the adjustment factor
for credits earned in MYs 2017-2025 at a single level that does not
change from model year to model year, as discussed further below.
If a manufacturer's vehicles in a particular compliance category
fall below the standard fuel economy value, NHTSA will provide written
notification to the manufacturer that it has not met a particular fleet
standard. The manufacturer will be required to confirm the shortfall
and must either submit a plan indicating it will allocate existing
credits, or if it does not have sufficient credits available in that
fleet, how it will earn, transfer and/or acquire credits, or pay the
appropriate civil penalty. The manufacturer must submit a plan or
payment within 60 days of receiving agency notification. Credit
allocation plans received from the manufacturer will be reviewed and
approved by NHTSA. NHTSA will approve a credit allocation plan unless
it finds the proposed credits are unavailable or that it is unlikely
that the plan will result in the manufacturer earning sufficient
credits to offset the subject credit shortfall. If a plan is approved,
NHTSA will revise the manufacturer's credit account accordingly. If a
plan is rejected, NHTSA will notify the manufacturer and request a
revised plan or payment of the appropriate fine.
In the event that a manufacturer does not comply with a CAFE
standard even after the consideration of credits, EPCA provides for the
assessment of civil penalties. The Act specifies a precise formula for
determining the amount of civil penalties for noncompliance.\824\ The
penalty, as adjusted for inflation by law, is $5.50 for each tenth of a
mpg that a manufacturer's average fuel economy falls short of the
standard for a given model year multiplied by the total volume of those
vehicles in the affected fleet (i.e., import or domestic passenger car,
or light truck), manufactured for that model year. The amount of the
penalty may not be reduced except under the unusual or extreme
circumstances specified in the statute. All penalties are paid to the
U.S. Treasury and not to NHTSA itself.
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\824\ See 49 U.S.C. 32912.
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Unlike the National Traffic and Motor Vehicle Safety Act, EPCA does
not provide for recall and remedy in the event of a noncompliance. The
presence of recall and remedy provisions \825\ in the Safety Act and
their absence in EPCA is believed to arise from the difference in the
application of the safety standards and CAFE standards. A safety
standard applies to individual vehicles; that is, each vehicle must
possess the requisite equipment or feature that must provide the
requisite type and level of performance. If a vehicle does not, it is
noncompliant. Typically, a vehicle does not entirely lack an item or
equipment or feature. Instead, the equipment or features fails to
perform adequately. Recalling the vehicle to repair or replace the
noncompliant equipment or feature can usually be readily accomplished.
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\825\ 49 U.S.C. 30120, Remedies for defects and noncompliance.
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In contrast, a CAFE standard applies to a manufacturer's entire
fleet for a model year. It does not require that a particular
individual vehicle be equipped with any particular equipment or feature
or meet a particular level of fuel economy. It does require that the
manufacturer's fleet, as a whole, comply. Further, although under the
attribute-based approach to setting CAFE standards fuel economy targets
are established for individual vehicles based on their footprints, the
vehicles are not required to comply with those targets on a model-by-
model or vehicle-by-vehicle basis. However, as a practical matter, if a
manufacturer chooses to design some vehicles so they fall below their
target levels of fuel economy, it will need to design other vehicles so
they exceed their targets if the manufacturer's overall fleet average
is to meet the applicable standard.
Thus, under EPCA, there is no such thing as a noncompliant vehicle,
only a noncompliant fleet. No particular vehicle in a noncompliant
fleet is any more, or less, noncompliant than any other vehicle in the
fleet.
After enforcement letters are sent, NHTSA continues to monitor
receipt of credit allocation plans or civil penalty payments that are
due within 60 days from the date of receipt of the letter by the
vehicle manufacturer, and takes further action if the manufacturer is
delinquent in responding. If NHTSA receives and approves a
manufacturer's carryback plan to earn future credits within the
following three years in order to comply with current regulatory
[[Page 75341]]
obligations, NHTSA will defer levying fines for non-compliance until
the date(s) when the manufacturer's approved plan indicates that
credits will be earned or acquired to achieve compliance, and upon
receiving confirmed CAFE data from EPA. If the manufacturer fails to
acquire or earn sufficient credits by the plan dates, NHTSA will
initiate compliance proceedings. 49 CFR part 536 contains the detailed
regulations governing the use and application of CAFE credits
authorized by 49 U.S.C. 32903.
3. What compliance flexibilities are available under the CAFE program
and how do manufacturers use them?
There are three basic flexibilities outlined by EPCA/EISA that
manufacturers can currently use to achieve compliance with CAFE
standards beyond applying fuel economy-improving technologies: (1)
Building dual- and alternative-fueled vehicles; (2) banking (carry-
forward and carry-back), trading, and transferring credits earned for
exceeding fuel economy standards; and (3) paying civil penalties. We
note that while these flexibility mechanisms will reduce compliance
costs to some degree for most manufacturers, 49 U.S.C. 32902(h)
expressly prohibits NHTSA from considering the availability of
statutorily-established credits (either for building dual- or
alternative-fueled vehicles or from accumulated transfers or trades) in
determining the level of the standards. Thus, NHTSA may not raise CAFE
standards because manufacturers have enough of those credits to meet
higher standards. This is an important difference from EPA's authority
under the CAA, which does not contain such a restriction, and which
allows EPA to set higher standards as a result.
a. Dual- and Alternative-Fueled Vehicles
As discussed at length in prior rulemakings, EPCA encourages
manufacturers to build alternative-fueled and dual- (or flexible-)
fueled vehicles by providing special fuel economy calculations for
``dedicated'' (that is, 100 percent) alternative fueled vehicles and
``dual-fueled'' (that is, capable of running on either the alternative
fuel or gasoline/diesel) vehicles. Consistent with the overarching
purpose of EPCA/EISA, these statutory incentives help to reduce
petroleum usage and thus improve our nation's energy security. Per
EPCA, the fuel economy of a dedicated alternative fuel vehicle is
determined by dividing its fuel economy in equivalent miles per gallon
of gasoline or diesel fuel by 0.15.\826\ Thus, a 15 mpg dedicated
alternative fuel vehicle would be rated as 100 mpg.
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\826\ 49 U.S.C. 32905(a).
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For dual-fueled vehicles, EPA measures the vehicle's fuel economy
rating by determining the average of the fuel economy on gasoline or
diesel and the fuel economy on the alternative fuel vehicle divided by
0.15.\827\ This calculation procedure, provided in EPCA, turns a dual-
fueled vehicle that averages 25 mpg on gasoline or diesel into a 40 mpg
vehicle for CAFE purposes. This assumes that (1) the vehicle operates
on gasoline or diesel 50 percent of the time and on alternative fuel 50
percent of the time; (2) fuel economy while operating on alternative
fuel is 15 mpg (15/.15 = 100 mpg); and (3) fuel economy while operating
on gas or diesel is 25 mpg. Thus:
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\827\ 49 U.S.C. 32905(b).
CAFE FE = 1/{0.5/(mpg gas) + 0.5/(mpg alt fuel){time} = 1/{0.5/25 +
---------------------------------------------------------------------------
0.5/100{time} = 40 mpg
In the case of natural gas, EPA's calculation is performed in a
similar manner. The fuel economy is the weighted average while
operating on natural gas and operating on gas or diesel. The statute
specifies that 100 cubic feet (ft\3\) of natural gas is equivalent to
0.823 gallons of gasoline. The CAFE fuel economy while operating on the
natural gas is determined by dividing its fuel economy in equivalent
miles per gallon of gasoline by 0.15.\828\ Thus, if a vehicle averages
25 miles per 100 ft\3\ of natural gas, then:
---------------------------------------------------------------------------
\828\ 49 U.S.C. 32905(c).
---------------------------------------------------------------------------
CAFE FE = (25/100) * (100/.823)*(1/0.15) = 203 mpg
Congress extended the dual-fueled vehicle incentive in EISA for
dual-fueled automobiles through MY 2019, but provided for its phase-out
between MYs 2015 and 2019.\829\ The maximum fleet fuel economy increase
attributable to this statutory incentive is thus as follows:
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\829\ 49 U.S.C. 32906(a). NHTSA notes that the incentive for
dedicated alternative-fuel automobiles, automobiles that run
exclusively on an alternative fuel, at 49 U.S.C. 32905(a), was not
phased-out by EISA.
We note additionally and for the reader's reference that EPA
will be treating dual- and alternative-fueled vehicles under its GHG
program similarly to the way EPCA/EISA provides for CAFE through MY
2015, but for MY 2016, EPA established CO2 emission
levels for alternative fuel vehicles based on measurement of actual
CO2 emissions during testing, plus a manufacturer
demonstration that the vehicles are actually being run on the
alternative fuel. The manufacturer would then be allowed to weight
the gasoline and alternative fuel test results based on the
proportion of actual usage of both fuels. Because EPCA/EISA provides
the explicit CAFE measurement methodology for EPA to use for
dedicated vehicles and dual-fueled vehicles through MY 2019, we
explained in the MYs 2012-2016 final rule that the CAFE program
would not require that vehicles manufactured for the purpose of
obtaining the credit actually be run on the alternative fuel.
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[[Page 75342]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.276
49 CFR part 538 codifies in regulation the statutory alternative-
fueled and dual-fueled automobile manufacturing incentive.
Given that the statutory incentive for dual-fueled vehicles in 49
U.S.C. 32906 and the measurement methodology specified in 49 U.S.C.
32905(b) and (d) expire in MY 2019, the question becomes, how should
the fuel economy of dual-fueled vehicles be determined for CAFE
compliance in MYs 2020 and beyond? NHTSA and EPA believe that the
expiration of the dual-fueled vehicle measurement methodology in the
statute leaves a gap to be filled, to avoid the absurd result of dual-
fueled vehicles' fuel economy being measured like that of conventional
gasoline vehicles. If the overarching purpose of the statute is energy
conservation and reducing petroleum usage, the agencies believe that
that goal is best met by continuing to reflect through CAFE
calculations the reduced petroleum usage that dual-fueled vehicles
achieve.
As discussed in more detail in Section III.B.10, for MYs 2020 and
beyond, to fill the gap left by the expiration of the statutory CAFE
measurement methodology for dual-fueled vehicles, EPA is proposing to
harmonize with the approach it uses under the GHG program to measure
the emissions of dual-fueled vehicles, to reflect the real-world
percentage of usage of alternative fuels by dual-fueled vehicles, but
also to continue to incentivize the use of certain alternative fuels in
dual-fueled vehicles as appropriate under EPCA/EISA to reduce petroleum
usage. Specifically, for MYs 2020 and beyond, EPA will calculate the
fuel economy test values for a plug-in hybrid electric vehicle (PHEV,
that runs on both gasoline and electricity) and for CNG-gasoline
vehicles on both the alternative fuel and on gasoline, but rather than
assuming that the dual-fueled vehicle runs on the alternative fuel 50
percent of the time as the current statutory measurement methodology
requires, EPA will instead use the Society of Automotive Engineers
(SAE) ``utility factor'' methodology (based on vehicle range on the
alternative fuel and typical daily travel mileage) to determine the
assumed percentage of operation on gasoline/diesel and percentage of
operation on the alternative fuel for those vehicles. Using the utility
factor, rather than making an a priori assumption about the amount of
alternative fuel used by dual-fueled vehicles, recognizes that once a
consumer has paid several thousand dollars to be able to use a fuel
that is considerably cheaper than gasoline or diesel, it is very likely
that the consumer will seek to use the cheaper fuel as much as
possible. Consistent with this approach, however, EPA is not proposing
to extend the utility factor method to flexible fueled vehicles (FFVs)
that use E-85 and gasoline, since there is not a significant cost
differential between an FFV and conventional gasoline vehicle and
historically consumers have only fueled these vehicles with E85 a very
small percentage of the time. Therefore, EPA is proposing for CAFE
compliance in MYs 2020 and beyond to continue treatment of E85 and
other FFVs as finalized in the MY 2016 GHG program, based on actual
usage of the alternative fuel which represents a real-world reduction
attributed to alternative fuels. For clarification in our regulations,
NHTSA is proposing to add Part 536.10(d) which states that for model
years 2020 and beyond a manufacturer must calculate the fuel economy of
dual fueled vehicles in accordance with 40 CFR 600.500-12(c), (2)(v)
and (vii), the sections of EPA's calculation regulations where EPA is
proposing to incorporate these changes.
Additionally, to avoid manufacturers building only dedicated
alternative fuel vehicles (which may be harder to refuel in some
instances) because of the continued statutory 0.15 CAFE divisor under
49 U.S.C. 32905(a) and the calculation for EV fuel economy under 49
U.S.C. 32904, and declining to build dual-fueled vehicles which might
not get a similar bonus, EPA is proposing to use the Petroleum
Equivalency Factor (PEF) and a 0.15 divisor for calculating the fuel
economy of PHEVs' electrical operation and for natural gas operation of
CNG-gasoline vehicles.\830\ This is consistent with the statutory
approach for dedicated alternative fuel vehicles, and continues to
incentivize the usage of alternative fuels and reduction of petroleum
usage, but when combined with the utility factor approach described
above, does not needlessly over-incentivize their usage--it gives
credit for what is used, and does not give credit for what is not used.
Because it does not give credit for what is not used, EPA would propose
that manufacturers may increase their calculated fleet fuel economy for
dual-
[[Page 75343]]
fueled vehicles by an unlimited amount using these flexibilities.
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\830\ EPA is also seeking comment on an approach that would not
use the PEF and 0.15 multiplier, as discussed above in Section III.
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As an example, for MYs 2020 and beyond, the calculation procedure
for a dual-fueled vehicle that uses both gasoline and CNG could result
in a combined fuel economy value of 150 mpg for CAFE purposes. This
assumes that (1) the ``utility factor'' for the alternative fuel is
found to be 95 percent, and so the vehicle operates on gasoline for the
remaining 5 percent of the time; (2) fuel economy while operating on
natural gas is 203 mpg [(25/100) * (100/.823) * (1/0.15)] as shown
above utilizing the PEF and the .15 incentive factor; and (3) fuel
economy while operating on gasoline is 25 mpg. Thus:
CAFE FE = 1/{0.05/(mpg gas) + 0.95/(mpg CNG){time} = 1/{0.05/25 +
0.95/203{time} = 150 mpg
The agencies seek comment on this approach.
b. Credit Trading and Transfer
As part of the MY 2011 final rule, NHTSA created 49 CFR part 536
for credit trading and transfer. Part 536 implements the provisions in
EISA authorizing NHTSA to establish by regulation a credit trading
program and directing it to establish by regulation a credit transfer
program.\831\ Since its enactment, EPCA has permitted manufacturers to
earn credits for exceeding the standards and to carry those credits
backward or forward. EISA extended the ``carry-forward'' period from
three to five model years, and left the ``carry-back'' period at three
model years. Under part 536, credit holders (including, but not limited
to, manufacturers) will have credit accounts with NHTSA, and will be
able to hold credits, use them to achieve compliance with CAFE
standards, transfer them between compliance categories, or trade them.
A credit may also be cancelled before its expiration date, if the
credit holder so chooses. Traded and transferred credits are subject to
an ``adjustment factor'' to ensure total oil savings are preserved, as
required by EISA. EISA also prohibits credits earned before MY 2011
from being transferred, so NHTSA has developed several regulatory
restrictions on trading and transferring to facilitate Congress' intent
in this regard. As discussed above, EISA establishes a ``cap'' for the
maximum increase in any compliance category attributable to transferred
credits: for MYs 2011-2013, transferred credits can only be used to
increase a manufacturer's CAFE level in a given compliance category by
1.0 mpg; for MYs 2014-2017, by 1.5 mpg; and for MYs 2018 and beyond, by
2.0 mpg.
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\831\ Congress required that DOT establish a credit
``transferring'' regulation, to allow individual manufacturers to
move credits from one of their fleets to another (e.g., using a
credit earned for exceeding the light truck standard for compliance
with the domestic passenger car standard). Congress allowed DOT to
establish a credit ``trading'' regulation, so that credits may be
bought and sold between manufacturers and other parties.
---------------------------------------------------------------------------
As part of this rulemaking, NHTSA is proposing to set the VMT
estimates used in the credit adjustment factor at 195,264 miles for
passenger car credits and 225,865 miles for light truck credits for
credits earned in MYs 2017-2025. The VMT estimates for MYs 2012-2016
would not change. NHTSA is proposing these values in the interest of
harmonizing with EPA's GHG program, and seeks comment on this approach
as compared to the prior approach of adjustment factors with VMT
estimates that vary by year. Additionally, NHTSA is proposing to
include VMT estimates for MY 2011 which the agency neglected to include
in Part 536 as part of the MYs 2012-2016 rulemaking. The proposed MY
2011 VMT estimate for passenger cars is 152,922 miles, and for light
trucks is 172,552 miles.
c. Payment of Civil Penalties
If a manufacturer's average miles per gallon for a given compliance
category (domestic passenger car, imported passenger car, light truck)
falls below the applicable standard, and the manufacturer cannot make
up the difference by using credits earned or acquired, the manufacturer
is subject to penalties. The penalty, as mentioned, is $5.50 for each
tenth of a mpg that a manufacturer's average fuel economy falls short
of the standard for a given model year, multiplied by the total volume
of those vehicles in the affected fleet, manufactured for that model
year. NHTSA has collected $794,921,139.50 to date in CAFE penalties,
the largest ever being paid by DaimlerChrysler for its MY 2006 import
passenger car fleet, $30,257,920.00. For their MY 2009 fleets, six
manufacturers paid CAFE fines for not meeting an applicable standard--
Fiat, which included Ferrari, Maserati, and Alfa Romeo; Daimler
(Mercedes-Benz); Porsche; and Tata (Jaguar Land Rover)--for a total of
$9,148,425.00. As mentioned above, civil penalties paid for CAFE non-
compliance go to the U.S. Treasury, and not to DOT or NHTSA.
NHTSA recognizes that some manufacturers may use the option to pay
civil penalties as a CAFE compliance flexibility--presumably, when
paying civil penalties is deemed more cost-effective than applying
additional fuel economy-improving technology, or when adding fuel
economy-improving technology would fundamentally change the
characteristics of the vehicle in ways that the manufacturer believes
its target consumers would not accept. NHTSA has no authority under
EPCA/EISA to prevent manufacturers from turning to payment of civil
penalties if they choose to do so. This is another important difference
from EPA's authority under the CAA, which allows EPA to revoke a
manufacturer's certificate of conformity that permits it to sell
vehicles if EPA determines that the manufacturer is in non-compliance,
and does not permit manufacturers to pay fines in lieu of compliance
with applicable standards.
NHTSA has grappled repeatedly with the issue of whether civil
penalties are motivational for manufacturers, and whether raising them
would increase manufacturers' compliance with the standards. EPCA
authorizes increasing the civil penalty very slightly up to $10.00,
exclusive of inflationary adjustments, if NHTSA decides that the
increase in the penalty ``will result in, or substantially further,
substantial energy conservation for automobiles in the model years in
which the increased penalty may be imposed; and will not have a
substantial deleterious impact on the economy of the United States, a
State, or a region of a State.'' 49 U.S.C. 32912(c).
To support a decision that increasing the penalty would result in
``substantial energy conservation'' without having ``a substantial
deleterious impact on the economy,'' NHTSA would likely need to provide
some reasonably certain quantitative estimates of the fuel that would
be saved, and the impact on the economy, if the penalty were raised.
Comments received on this issue in the past have not explained in clear
quantitative terms what the benefits and drawbacks to raising the
penalty might be. Additionally, it may be that the range of possible
increase that the statute provides, i.e., up to $10 per tenth of a mpg,
is insufficient to result in substantial energy conservation, although
changing this would require an amendment to the statute by Congress.
NHTSA continues to seek to gain information on this issue and requests
that commenters wishing to address this issue please provide, as
specifically as possible, estimates of how raising or not raising the
penalty amount will or will not substantially raise energy conservation
and impact the economy.
[[Page 75344]]
4. What new incentives are being added to the CAFE program for MYs
2017-2025?
All of the CAFE compliance incentives discussed below are being
proposed by EPA under its EPCA authority to calculate fuel economy
levels for individual vehicles and for fleets. Because they are EPA
proposals, we refer the reader to Section III for more details, as well
as Chapter 5 of the draft Joint TSD for more information on the precise
mechanics of the incentives, but we present them here in summary form
so that the reader may understand more comprehensively what compliance
options are proposed to be available for manufacturers for meeting the
MYs 2017-2025 CAFE standards.
As mentioned above with regard to EPA's proposed changes for the
calculation of dual-fueled automobile fuel economy for MYs 2020 and
beyond, NHTSA is proposing to modify its own regulations to reflect the
fact that these incentives may be used as part of the determination of
a manufacturer's CAFE level. The requirements for determining the
vehicle and fleet average performance for passenger cars and light
trucks inclusive of the proposed incentives are defined in 49 CFR part
531 and 49 CFR part 533, respectively. Part 531.6(a) specifies that the
average fuel economy of all passenger automobiles that are manufactured
by a manufacturer in a model year shall be determined in accordance
with procedures established by the Administrator of the Environmental
Protection Agency under 49 U.S.C. 32904 of the Act and set forth in 40
CFR part 600. Part 533.6 (b) specifies that the average fuel economy of
all non-passenger automobiles is required to be determined in
accordance with the procedures established by the Administrator of the
Environmental Protection Agency under 49 U.S.C. 32904 and set forth in
40 CFR part 600. Proposed changes to these sections would simply
clarify that in model years 2017 to 2025, manufacturers may adjust
their vehicle fuel economy performance values in accordance with 40 CFR
Part 600 for improvements due to the new incentives. We seek comment on
this proposed change.
a. ``Game Changing'' Technologies For Full Size Pick-Up Trucks
EPA is proposing to adopt two new types of incentives for improving
the fuel economy performance of full size pickup trucks. The first
incentive would provide a credit to manufacturers that employ
significant quantities of hybridization on full size pickup trucks. The
second incentive would provide a performance-based incentive for full
size pickup trucks that achieve a significant reduction in fuel
consumption as compared to the applicable fuel economy target for the
vehicle in question. These incentives are proposed due to the
significant difficulty of large trucks, including full size pickup
trucks, in meeting CAFE standards while still maintaining the levels of
utility to which consumers have become accustomed, which require higher
payload and towing capabilities and greater cargo volumes than other
light-duty vehicles. Technologies that provide substantial fuel economy
benefits are often not attractive to manufacturers of large trucks due
to these tradeoffs in utility purposes, and therefore have not been
taken advantage of to the same extent as they have in other vehicle
classes. The goal of these incentives is to facilitate the application
of these ``game changing'' technologies for large pickups, both to save
more fuel and to help provide a bridge for industry to more stringent
light truck standards in MYs 2022-2025--as manufacturers gain
experience with applying more fuel-saving technology for these vehicles
and consumers become more accustomed to certain advanced technologies
in pickup trucks, the agencies anticipate that higher CAFE levels will
be more feasible for the fleet as a whole.\832\ In the context of the
CAFE program, these incentives would be used as an adjustment to a full
size pickup truck's fuel economy performance. The same vehicle would
not be allowed to receive an adjustment to its calculated fuel economy
for both the hybridization incentive and the performance-based
incentive, to avoid double-counting.
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\832\ NHTSA is not prohibited from considering this availability
of this incentive in determining the maximum feasible levels of
stringency for the light truck standards, because it is not one of
the statutory flexibilities enumerated in 49 U.S.C. 32902(h).
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To accommodate the proposed changes to the CAFE program, NHTSA is
proposing to adopt new definitions into regulation, 49 CFR part 523,
``Vehicle Classification.'' Part 523 was established by NHTSA to
include its regulatory definitions for passenger automobiles and trucks
and to guide the agency and manufacturers in classifying vehicles.
NHTSA proposes to add a definition in Part 523.2 defining the
characteristics that identify full size pickup trucks. NHTSA believes
that the definition is needed to help explain to readers which
characteristics of full size pickup truck make them eligible to gain
fuel economy improvement values allowed after a manufacturer meets
either a minimum penetration of hybridized technologies or has other
technologies that significantly reduce fuel consumption. The proposed
improvement would be available on a per-vehicle basis for mild and
strong HEVs, as well as for other technologies that significantly
improve the efficiency of full sized pickup trucks. The proposed
definition would specify that trucks meeting an overall bed width and
length as well as a minimum towing or payload capacity could be
qualified as full size pickup trucks. NHTSA is also proposing to modify
Part 523 to include definitions for mild and strong hybrid electric
full size pickup trucks, and to include the references in Part 533
mentioned above.
i. Pickup Truck Hybridization
One proposed incentive would provide an adjustment to the fuel
economy of a manufacturer's full size pickup trucks if the manufacturer
employs certain defined hybrid technologies on defined significant
quantities of its full size pickup trucks. After meeting the minimum
production percentages, manufacturers would gain an adjustment to the
fuel economy performance for each ``mild'' or ``strong'' hybrid full
size pickup truck it produces. Manufacturers producing mild hybrid
pickup trucks, as defined in Chapter 5 of the draft Joint TSD, would
gain the incentive by applying mild hybrid technology to at least 30
percent of the company's full sized pickups produced in MY 2017, which
would increase each year up to at least 80 percent of the company's
full size pickups produced in MY 2021, after which point the adjustment
is no longer applicable. For strong hybrids, also defined in Chapter 5
of the draft Joint TSD, the strong hybrid technology must be applied to
at least 10 percent of a company's full sized pickup production in each
year for model years 2017-2025. The fuel economy adjustment for each
mild hybrid full size pickup would be a decrease in measured fuel
consumption of 0.0011gal/mi; for each strong hybrid full size pickup,
the decrease in measured fuel consumption would be 0.0023 gal/mi. These
adjustments are consistent with the GHG credits under EPA's program of
10 g/mi CO2 for mild hybrid pickups and 20 g/mi
CO2 for strong hybrid pickups. A manufacturer would then be
allowed to adjust the fuel economy performance of its light truck fleet
by converting the benefit gained from those improvements in accordance
with the procedures specified in 40 CFR part 600.
[[Page 75345]]
ii. Performance-Based Incentive for Full-Size Pickups
Another proposed incentive for full size pickup trucks would
provide an adjustment to the fuel economy of a manufacturer's full
sized pickup truck if it achieves a fuel economy performance level
significantly above the CAFE target for that footprint. This incentive
recognizes that not all manufacturers may wish to pursue hybridization
for their pickup trucks, but still rewards them for applying fuel-
saving technologies above and beyond what they might otherwise do. The
fuel economy adjustment for each full size pickup that exceeds its
applicable footprint curve target by 15 percent would be a decrease in
measured fuel consumption of 0.0011gal/mi; for each full size pickup
that exceeds its applicable footprint curve target by 20 percent, the
decrease in measured fuel consumption would be 0.0023 gal/mi. These
adjustments are consistent with the GHG credits under EPA's program of
10 g/mi CO2 and 20 g/mi CO2, respectively, for
beating the applicable CO2 targets by 15 and 20 percent,
respectively.
The 0.0011 gal/mi performance-based adjustment would be available
for MYs 2017 to 2021, and a vehicle meeting the requirement in a given
model year would continue to receive the credit until MY 2021--that is,
the credit remains applicable to that vehicle model if the target is
exceeded in only one model year--unless its fuel consumption increases.
The 0.0023 gal/mi adjustment would be available for a maximum of 5
years within model years 2017-2025, provided the vehicle model's fuel
consumption does not increase. As explained above for the hybrid
incentive, a manufacturer would then be allowed to adjust the fuel
economy performance of its light truck fleet by converting the benefit
gained from those improvements in accordance with the procedures
specified in 40 CFR Part 600.
We note that in today's analyses, the agencies have projected that
PHEV technology is not available to large pickups. While it is
technically possible to electrify such vehicles, there are tradeoffs in
terms of cost, electric range, and utility that may reduce the appeal
of the vehicle to a narrower market. Due to this consideration, the
agencies have not considered giving credit to PHEVs for large pickup
truck. However, the agencies seek comments on this and will give
further consideration during the final rule. Also, the agencies note
that under today's proposal, a PHEV that captures a sufficient
proportion of braking energy could quality for the HEV adjustment;
alternatively, a PHEV pickup achieving sufficiently high fuel economy
and low CO2 emission could qualify for a performance-based
adjustment.
b. A/C Efficiency-Improving Technologies
Air conditioning (A/C) use places excess load on an engine, which
results in additional fuel consumption. A number of methods related to
the A/C system components and their controls can be used to improve A/C
system efficiencies. Starting in MY 2017, EPA is proposing to allow
manufacturers to include fuel consumption reductions resulting from the
use of improved A/C systems in their CAFE calculations. This will more
accurately account for achieved real-world fuel economy improvements
due to improved A/C technologies, and better fulfill EPCA's overarching
purpose of energy conservation. Manufacturers would not be allowed to
claim CAFE-related benefits for reducing A/C leakage or switching to an
A/C refrigerant with a lower global warming potential, because while
these improvements reduce GHGs consistent with the purpose of the CAA,
they do not improve fuel economy and thus are not relevant to the CAFE
program.
The improvements that manufacturers would likely use to increase A/
C efficiency would focus primarily, but not exclusively, on the
compressor, electric motor controls, and system controls which reduce
load on the A/C system (such as reduced ``reheat'' of the cooled air
and increased use of re-circulated cabin air).
Fuel consumption improvement values for CAFE resulting from A/C
efficiency improvements would be quantified using a two-step process,
the same as for the related CO2 credits for EPA's GHG
program. First, the vehicle with the improved A/C system would be
tested in accordance with EPA testing guidelines, and compared with the
baseline fuel consumption value for that vehicle. Second, the
difference between the baseline fuel consumption value and the value
for the vehicle with improved A/C technologies would be calculated,
which would determine the fuel consumption improvement value.
In the GHG program for MYs 2012 to 2016, EPA finalized the idle
test method for measuring CO2reductions from improved AC
systems. The idle test method measures CO2 in grams per
minute (g/min) while the vehicle is stationary and idling. For MYs
2017-2025, EPA is proposing that a new test called ``A/C 17'' replace
the idle test to measure A/C related CO2emissions
reductions. Some aspects of the AC17 test are still being developed and
improved, but the basic procedure is sufficiently complete for EPA to
propose it as a reporting option alternative to the Idle Test threshold
in 2014, and a replacement for the Idle Test in 2017, as a prerequisite
for generating Efficiency Credits. Manufacturers will use this test to
measure A/C-related CO2 emissions from vehicles with
improved A/C systems, which would be translated to fuel consumption to
establish the ratio between the baseline vehicle and the improved-A/C
vehicle to determine the value of the fuel consumption improvement. The
A/C 17 test procedure is described briefly below.
i. What is the proposed testing approach?
The A/C 17 test is a more extensive test than the idle test and has
four elements, including two drive cycles, US03 and the highway fuel
economy cycle, which capture steady state and transient operating
conditions. It also includes a solar soak period to measure the energy
required to cool down a car that has been sitting in the sun, as well
as a pre-conditioning cycle. The A/C 17 test cycle will be able to
capture improvements in all areas related to efficient operation of a
vehicle's A/C system. The A/C 17 test cycle measures CO2
emissions in grams per mile (g/mi), and requires that baseline
emissions be measured in addition to emissions from vehicles with
improved A/C systems. EPA is taking comment on whether the A/C 17 test
is appropriate for estimating the effectiveness of new efficiency-
improving A/C technologies.
ii. How are fuel consumption improvement values then estimated?
Manufacturers would run the A/C 17 test procedure on each vehicle
platform that incorporates the new technologies, with the A/C system
off and then on, and then report these test results to the EPA. In
addition to reporting the test results, EPA will require that
manufacturers provide detailed vehicle and A/C system information for
each vehicle tested (e.g. vehicle class, model type, curb weight,
engine size, transmission type, interior volume, climate control type,
refrigerant type, compressor type, and evaporator/condenser
characteristics). For vehicle models which manufacturers are seeking to
earn A/C related fuel consumption improvement values, the A/C 17 test
would be run to validate that the performance and efficiency of a
vehicle's A/C technology is commensurate to the level of
[[Page 75346]]
improvement value that is being earned. To determine whether the
efficiency improvements of these technologies are being realized, the
results of an A/C 17 test performed on a new vehicle model will be
compared to a ``baseline'' vehicle which does not incorporate the
efficiency-improving technologies. The baseline vehicle is defined as
one with characteristics which are similar to the new vehicle, only it
is not equipped with efficiency-improving technologies (or they are de-
activated).
Manufacturers then take the results of the A/C 17 test and access a
credit menu (shown in the table below) to determine A/C related fuel
consumption improvement values. The maximum value possible is limited
to 0.000563 gal/mi for cars and 0.000810 gal/mi for trucks. As an
example, a manufacturer uses two technologies listed in the table, for
which the combined improvement value equals 0.000282 gal/mi. If the
results of the A/C 17 tests for the baseline and vehicle with improved
A/C system demonstrates a 0.000282 gal/mi improvement, then the full
fuel consumption improvement value for those two technologies can be
taken. If the A/C 17 test result falls short of the improvement value
for the two technologies, then a fraction of the improvement value may
be counted in CAFE calculations. The improvement value fraction is
calculated in the following way: The A/C 17 test result for both the
baseline vehicle and the vehicle with an improved A/C system are
measured. The difference in the test result of the baseline and the
improved vehicle is divided by the test result of the baseline vehicle.
This fraction is multiplied by the fuel consumption improvement value
for the specific technologies. Thus, if the A/C 17 test yielded an
improvement equal to \2/3\ of the summed values listed in the table,
then \2/3\ of the summed fuel consumption improvement values can be
counted.
BILLING CODE 4910-59-P
[[Page 75347]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.277
[[Page 75348]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.278
As stated above, if more than one technology is utilized by a
manufacturer for a given vehicle model, the A/C fuel consumption
improvement values can be added, but the maximum value possible is
limited to 0.000563 gal/mi for cars and 0.000810 gal/mi for trucks.
More A/C related fuel consumption improvement values are discussed in
the off-cycle credits section of this chapter. The approach for
determining the manufacturers' adjusted fleet fuel economy performance
due to improvements in A/C efficiency is described in 40 CFR Part 600.
The agencies seek comment on the proposal to allow manufacturers to
estimate fuel consumption reductions from the use of A/C efficiency-
improving technologies and to apply these reductions to their CAFE
calculations.
c. Off-Cycle Technologies and Adjustments
For MYs 2012-2016, EPA provided an optional credit for new and
innovative ``off-cycle'' technologies that reduce vehicle
CO2 emissions, but for which the CO2 reduction
benefits are not recognized under the 2-cycle test procedure used to
determine compliance with the fleet average standards. The off-cycle
credit option was intended to encourage the introduction of off-cycle
technologies that achieve real-world benefits. The off-cycle credits
were to be determined using the 5-cycle methodology currently used to
determine fuel economy label values, which EPA established to better
represent real-world factors impacting fuel economy, including higher
speeds and more aggressive driving, colder temperature operation, and
the use of air conditioning. A manufacturer must determine whether the
benefit of the technology could be captured using the 5-cycle test; if
this determination is affirmative, the manufacture must follow the 5-
cycle procedures to determine the CO2 reductions. If the
manufacturer finds that the technology is such that the benefit is not
adequately captured using the 5-cycle approach, then the manufacturer
would have to develop a robust methodology, subject to EPA approval, to
demonstrate the benefit and determine the appropriate CO2
gram per mile credit. The demonstration program must be robust,
verifiable, and capable of demonstrating the real-world emissions
benefit of the technology with strong statistical significance. The
non-5-cycle approach includes an opportunity for public comment as part
of the approval process.
EPA has been encouraged by automakers' interest in off-cycle
credits since the program was finalized and believes that extending the
program to MY 2017 and beyond may continue to encourage automakers to
invest in off-cycle technologies that could have the benefit of
realizing additional reductions in the light-duty fleet over the
longer-term. Therefore, EPA is proposing to extend the off-cycle
credits program to 2017 and later model years. EPA is also proposing,
under its EPCA authority, to make available a comparable off-cycle
technology incentive under the CAFE program beginning in MY 2017.
However, instead of manufacturers gaining credits as done under the GHG
program, a direct adjustment would be made to the manufacturer's fuel
economy performance value.
Starting with MY 2017, manufacturers may generate fuel economy
improvements by applying technologies listed on the pre-defined and
pre-approved technology list provided in Table IV-117. These credits
would be verified and approved as part of certification, with no prior
approval process needed. This new option should
[[Page 75349]]
significantly simplify the program for manufacturers and provide
certainty that improvement values may be generated through the use of
pre-approved technologies. For improvements from technologies not on
the pre-defined list, EPA is proposing to clarify the step-by-step
application process for demonstration of fuel consumption reductions
and approval.
[GRAPHIC] [TIFF OMITTED] TP01DE11.279
An example of technologies that could be used to generate off-cycle
improvements are those that reduce electrical load and as a result,
fuel consumption. The 2-cycle test does not require that all electrical
components be turned on during testing. Headlights, for example, are
always turned off during testing. Turning the headlights on during
normal driving will add an additional load on the vehicle's electrical
system and will affect fuel economy. More efficient electrical systems
or technologies that offset electrical loads will have a real-world
impact on fuel economy but are not captured in the 2-cycle test.
Therefore, technologies that reduce or offset
[[Page 75350]]
electrical loads related to the operation or safety of the vehicle
should merit consideration for off-cycle improvements. Reducing the
electrical load on a vehicle by 100W will result in an average of
0.000337 gallons/mile reduction in fuel consumption over the course of
a 2-cycle test, or 0.00042 gallons/mile over a 5-cycle test. To
determine the off-cycle benefit of certain 100W electrical load
reduction technologies, the benefit of the technology on the 2-cycle
test is subtracted from the benefit of the technology on the 5-cycle
test. This determines the actual benefit of the technology not realized
in the 2-cycle test methodology, which in this case is 0.000416 gal/mi
minus 0.000337 gal/mi, or 0.000078 gal/mi. This method will avoid
double-counting the benefit of the electrical load reduction, which is
already counted on the 2-cycle test.
Regardless of whether the off-cycle technology fuel consumption
benefit is obtained from the table (columns 2 or 3) above or is based
on an approved testing protocol as indicated in the preceding example,
under the CAFE program the benefit or credit is treated as an
adjustment and subtracted from the subject vehicle's fuel consumption
performance value determined from the required CAFE program 2-cycle
test results. A manufacturer would then be allowed to adjust the fuel
economy performance of its fleets by converting the benefit gained from
those improvements in accordance with the procedures specified in 40
CFR Part 600.
Since one purpose of the off-cycle improvement incentive is to
encourage market penetration of the technologies (see 75 FR at 25438),
EPA is proposing to require minimum penetration rates for non-hybrid
based listed technologies as a condition for generating improvements
from the list as a way to further encourage their widespread adoption
by MY 2017 and later. At the end of the model year for which the off-
cycle improvement is claimed, manufacturers would need to demonstrate
that production of vehicles equipped with the technologies for that
model year exceeded the percentage thresholds in order to receive the
listed improvement. EPA proposes to set the threshold at 10 percent of
a manufacturer's overall combined car and light truck production for
all technologies not specific to HEVs. 10 percent would seem to be an
appropriate threshold as it would encourage manufacturers to develop
technologies for use on larger volume models and bring the technologies
into the mainstream. For solar roof panels and electric heat
circulation pumps, which are HEV-specific, EPA is not proposing a
minimum penetration rate threshold for credit generation. Hybrids may
be a small subset of a manufacturer's fleet, less than 10 percent in
some cases, and EPA does not believe that establishing a threshold for
hybrid-based technologies would be useful and could unnecessarily
complicate the introduction of these technologies. The agencies request
comments on applying this type of threshold, the appropriateness of 10
percent as the threshold for listed technologies that are not HEV-
specific, and the proposed treatment of hybrid-based technologies.
Because the proposed improvements are based on limited data,
however, and because some uncertainty is introduced when credits are
provided based on a general assessment of off-cycle performance as
opposed to testing on the individual vehicle models, as part of the
incentive EPA is proposing to cap the amount of improvement a
manufacturer could generate using the above list to 0.001125 gal/mile
per year on a combined car and truck fleet-wide average basis. The cap
would not apply on a vehicle model basis, allowing manufacturers the
flexibility to focus off-cycle technologies on certain vehicle models
and generate improvements for that vehicle model in excess of 0.001125
gal/mile. If manufacturers wish to generate improvements in excess of
the 0.001125 gal/mile limit using listed technologies, they could do so
by generating necessary data and going through the approval process.
For more details on the testing protocols used for determining off-
cycle technology benefits and the step-by-step EPA review and approval
process, refer to Section III.C.5.b.iii and v. The approach for
determining a manufacturer's adjusted fuel economy performance for off-
cycle technologies is described in 40 CFR Part 600. NHTSA also proposes
to incorporate references in Part 531.6 and 533.6 to allow
manufacturers to adjust their fleet performance for off-cycle
technologies as described above.
5. Other CAFE Enforcement Issues
a. Electronic Reporting
Pursuant to 49 CFR part 537, manufacturers submit pre-model year
fuel economy reports to NHTSA by December 31st prior to the model year,
and mid-model year reports by July 31st of the model year.
Manufacturers may also provide supplemental reports whenever changes
are needed to a previously submitted CAFE report. NHTSA receives both
non-confidential and confidential versions of reports, the basic
difference being the inclusion of projected upcoming production sales
volumes in reports seeking confidentiality. Manufacturers must include
a request for confidentiality, in accordance with 49 CFR part 512,
along with the report for which confidential treatment is sought.\833\
Manufacturers may submit reports either in paper form or electronically
to a secure email address, [email protected], that allows for the safe
handling of confidential materials. All electronic submissions
submitted to the CAFE email must be provided in a pdf format. NHTSA
added electronic reporting to the 2012-2016 CAFE rule as an approach to
simplify reporting for manufacturers and NHTSA alike. Currently, most
manufacturers submit both electronic and paper reports.\834\
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\833\ Pursuant to Sec. 537.12, NHTSA's Office of Chief Counsel
normally grants confidentiality to reports with projected production
sales volumes until after the model year ends.
\834\ For model year 2011, NHTSA received electronic mid-model
year reports from 12 manufacturers. Each of the manufacturers also
provided hardcopy reports.
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NHTSA is proposing to modify its reporting requirements to receive
all CAFE reports in electronic format, thereby eliminating the
requirement for paper submissions. In the revised requirements, a
manufacturer could either submit its reports on a CD-ROM or through the
existing email procedures. Under the proposal, the contents of the CD
must include the manufacturer's request for confidentiality, the cover
letter, and any other supporting documents in a pdf format. Any data
included in the report must be provided in a Microsoft Excel
spreadsheet format. The same approach is also proposed for submitting
information by email. NHTSA emphasizes that submitting reports to the
CAFE email address is completely voluntary, but if the option is
selected, the manufacturer must follow the normal deadline dates as
specified in 49 CFR 537.5. NHTSA believes that receiving CAFE data
through electronic reports would be a significant improvement,
improving the quality of its CAFE data, simplifying enforcement
activities (e.g., auditing the data), and helping to expedite the
tracking and reporting of CAFE credits. The agency also plans to
eventually develop an XML schema for submitting CAFE reports
electronically that will available through its Web site. Ultimately,
the XML schema would be used as part of the new database system NHTSA
plans to construct in the future to store its
[[Page 75351]]
CAFE data. NHTSA seeks comments on the appropriateness of ending paper
submissions, as well as information on any other electronic formats
that should be considered for submissions.
b. Reporting of How a Vehicle Is Classified as a Light Truck
As part of the reporting provisions in 49 CFR part 537, NHTSA
requires manufacturers to provide information on some, but not all, of
the functions and features that a manufacturer uses to classify an
automobile as a light truck. The required data is distributed
throughout the report, making it difficult for the agency to clearly
and easily determine exactly what functions or features a manufacturer
is actually using to make this determination. For example, related to
the functions specified in 49 CFR 523.5(a) and discussed in Section
IV.H above, manufacturers must provide the vehicles' passenger and
cargo carrying volumes,\835\ and identify whether their vehicles are
equipped with three rows of seats that can be removed or folded flat
for expanded cargo carrying purposes or if the vehicle includes
temporary living quarters.\836\ Manufacturers are not required to
identify whether the vehicles can transport more than 10 persons or if
the vehicles are equipped with an open cargo bed. Related to the
functions specified in Section 523.5(b), for each model type classified
as an automobile capable of off-highway operation, manufacturers are
required to provide the five suspension parameter measurements and
indicate the existence of 4-wheel drive,\837\ but they are not required
to identify a vehicle's GVWR, which is necessary for off-road
determination when the vehicle is not equipped with 4-wheel drive.
NHTSA proposes to eliminate the language requesting vehicle attribute
information in Sections 537.7(c)(4)(xvi)(A)(3) to (6) and (B)(3) to (6)
and to relocate that language into a revised Section 537.7(c)(5) to
include identification of all the functions and features that can be
used by a manufacturer for making a light truck classification
determination. By incorporating all the requirements into one section,
the agency believes the classification process will become
significantly more accurate and efficient. NHTSA seeks comment on this
proposed change.
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\835\ 49 CFR 537.7(c)(4)(xvi)(B).
\836\ 49 CFR 537.7(c)(4)(xvii) and (xviii).
\837\ 49 CFR 537.7(c)(5).
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c. Base Tire Definition
Beginning in model year 2011, manufacturers of light trucks and
passenger cars are required to use vehicle footprint to determine the
CAFE standards applicable to each of their vehicle fleets. To determine
the appropriate footprint-based standards, a manufacturer must
calculate each vehicle's footprint value, which is the product of the
vehicle track width and wheelbase dimensions. Vehicle track width
dimensions are determined with a vehicle equipped with ``base tires,''
\838\ which NHTSA defines as the tire specified as standard equipment
by a manufacturer on each vehicle configuration of a model type.
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\838\ See 49 CFR 523.2.
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NHTSA is concerned that the definition for ``base tire'' is
insufficiently descriptive, and may lead to inconsistencies among
manufacturers' base tire selections. In meetings relating to CAFE
enforcement, manufacturers have stated that various approaches in
selecting base tires exist due to differences in the tires considered
as standard equipment.\839\ Standard equipment is defined by EPA
regulation as those features or equipment which are marketed on a
vehicle over which the purchaser can exercise no choice,\840\ but NHTSA
regulations have no comparable definition. NHTSA considered whether
adding a definition for ``standard equipment'' would clarify and
strengthen the NHTSA regulations, but some manufacturers indicated that
the definition of standard equipment provided by EPA does not
effectively prevent differences in their interpretations. Some
manufacturers, for example, view the base tire as the tire equipped as
standard equipment for each trim level of a model type, as each trim
level has standard equipment over which the purchaser cannot exercise a
choice. This view can allow multiple base tires and footprint values
within each model type: A manufacturer may have two vehicle
configurations for a particular model type, with each configuration
having three trim levels with different standard tires sizes. In that
scenario, the model type could have 6 different trim level vehicle
configurations, each having three or more unique footprint values with
slightly different targets. The additional target fuel economy values
could allow the manufacturer to reduce its required fleet standard
despite a vehicle model type not having any inherent differences in
physical feature between vehicle configurations other than the tire
sizes. Other manufacturers, in contrast, avoid designating multiple
base tires and choose the standard tire equipped on the most basic
vehicle configuration of a model type, even if the most basic vehicle
is rarely actually sold. In this scenario, the tires being used to
derive a manufacturer fleet standard are not the same size tire
equipped on the representative number of vehicles being sold. Yet
others designate the base tire as the tire most commonly installed on a
model type having the highest production volume. This approach most
realistically reflects the manufacturer's sales production fleet.
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\839\ NHTSA has confirmed these differences in approach for the
designating base tire exist through review of manufacturer-submitted
CAFE reports.
\840\ In the EPA regulation 40 CFR 600.002-08, standard
equipment means those features or equipment which are marketed on a
vehicle over which the purchaser can exercise no choice.
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To attempt to reconcile the varied approaches for designating base
tires, NHTSA is proposing to modify its definition for base tire in 49
CFR 523.2. The proposed modification changes the definition of the base
tire by dropping the reference to ``standard equipment'' and adding a
reference to the ``the tire installed by the vehicle manufacturer that
is used on the highest production sales volume of vehicles within the
configuration.'' This modification should ensure that the tires
installed on the vehicle most commonly sold within a vehicle
configuration become the basis for setting a manufacturer's fuel
economy standards. It is NHTSA's goal that a change to the definition
of base tire for purposes of CAFE will help to reduce inconsistencies
and confusion for both the agency and the manufacturers. NHTSA seeks
comments on this approach, as well as other approaches that could be
used for selecting the base tire(s).
d. Confirming Target and Fleet Standards
NHTSA requires manufacturers to provide reports containing fleet
and model type CAFE standards and projections of expected performance
results for each model year.\841\ The footprint, track width and
wheelbase values are provided for each vehicle configuration within the
model types making up the manufacturer's fleets, along with other model
type-specific information. Because this information is organized by
vehicle configuration, instead of by each vehicle with a unique model
type and footprint combination, it is not in the format needed to
calculate performance standards. EPA, in contrast, requires
manufacturers to provide all of the information necessary
[[Page 75352]]
to calculate footprint values and CAFE standards. EPA provides an
additional calculator (in the form of an Excel spreadsheet), which all
manufacturers use and submit as part of their end-of-the-year reports,
which includes the appropriate breakdown of footprint values for
calculating standards.
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\841\ 49 CFR part 537.
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Since NHTSA only requires a breakdown of footprint values by
vehicle configurations, instead of by each unique model type and
footprint combination, NHTSA is currently unable to verify
manufacturers' reported target standards. By standardizing with EPA's
requirements for reported data, NHTSA would both simplify manufacturer
reporting efforts and gain the necessary information for calculating
attribute-based CAFE standards. Therefore, NHTSA is proposing to
eliminate the language requesting information in Sec.
537.7(c)(4)((xvi)(A)(3) through (6) and (B)(3) through (6), and to
relocate that language into a revised Sec. 537.7(b)(3).
NHTSA requests comment on this proposed change.
J. Regulatory Notices and Analyses
1. Executive Order 12866, Executive Order 13563, and DOT Regulatory
Policies and Procedures
Executive Order 12866, ``Regulatory Planning and Review'' (58 FR
51735, Oct. 4, 1993), as amended by Executive Order 13563, ``Improving
Regulation and Regulatory Review'' (76 FR 3821, Jan. 21, 2011),
provides for making determinations whether a regulatory action is
``significant'' and therefore subject to OMB review and to the
requirements of the Executive Order. The Order defines a ``significant
regulatory action'' as one that is likely to result in a rule that may:
(1) Have an annual effect on the economy of $100 million or more or
adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or Tribal governments or
communities;
(2) Create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency;
(3) Materially alter the budgetary impact of entitlements, grants,
user fees, or loan programs or the rights and obligations of recipients
thereof; or
(4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
the Executive Order.
The rulemaking proposed in this NPRM will be economically
significant if adopted. Accordingly, OMB reviewed it under Executive
Order 12866. The rule, if adopted, would also be significant within the
meaning of the Department of Transportation's Regulatory Policies and
Procedures.
The benefits and costs of this proposal are described above.
Because the proposed rule would, if adopted, be economically
significant under both the Department of Transportation's procedures
and OMB guidelines, the agency has prepared a Preliminary Regulatory
Impact Analysis (PRIA) and placed it in the docket and on the agency's
Web site. Further, pursuant to Circular A-4, we have prepared a formal
probabilistic uncertainty analysis for this proposal. The circular
requires such an analysis for complex rules where there are large,
multiple uncertainties whose analysis raises technical challenges or
where effects cascade and where the impacts of the rule exceed $1
billion. This proposal meets these criteria on all counts.
2. National Environmental Policy Act
Concurrently with this NPRM, NHTSA is releasing a Draft
Environmental Impact Statement (Draft EIS), pursuant to the National
Environmental Policy Act, 42 U.S.C. 4321-4347, and implementing
regulations issued by the Council on Environmental Quality (CEQ), 40
CFR part 1500, and NHTSA, 49 CFR part 520. NHTSA prepared the Draft EIS
to analyze and disclose the potential environmental impacts of the
proposed CAFE standards and a range of alternatives. The Draft EIS
analyzes direct, indirect, and cumulative impacts and analyzes impacts
in proportion to their significance.
Because of the link between the transportation sector and GHG
emissions, the Draft EIS considers the possible impacts on climate and
global climate change in the analysis of the effects of these proposed
CAFE standards. The Draft EIS also describes potential environmental
impacts to a variety of resources. Resources that may be affected by
the proposed action and alternatives include water resources,
biological resources, land use and development, safety, hazardous
materials and regulated wastes, noise, socioeconomics, fuel and energy
use, air quality, and environmental justice. These resource areas are
assessed qualitatively in the Draft EIS.
For additional information on NHTSA's NEPA analysis, please see the
Draft EIS.
3. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq.,
as amended by the Small Business Regulatory Enforcement Fairness Act
(SBREFA) of 1996), whenever an agency is required to publish a notice
of rulemaking for any proposed or final rule, it must prepare and make
available for public comment a regulatory flexibility analysis that
describes the effect of the rule on small entities (i.e., small
businesses, small organizations, and small governmental jurisdictions).
The Small Business Administration's regulations at 13 CFR part 121
define a small business, in part, as a business entity ``which operates
primarily within the United States.'' 13 CFR 121.105(a). No regulatory
flexibility analysis is required if the head of an agency certifies the
rule will not have a significant economic impact of a substantial
number of small entities.
I certify that the proposed rule would not have a significant
economic impact on a substantial number of small entities. The
following is NHTSA's statement providing the factual basis for the
certification (5 U.S.C. 605(b)).
If adopted, the proposal would directly affect nineteen large
single stage motor vehicle manufacturers.\842\ Based on our preliminary
assessment, the proposal would also affect a total of about 21 entities
that fit the Small Business Administration's criteria for a small
business. According to the Small Business Administration's small
business size standards (see 13 CFR 121.201), a single stage automobile
or light truck manufacturer (NAICS code 336111, Automobile
Manufacturing; 336112, Light Truck and Utility Vehicle Manufacturing)
must have 1,000 or fewer employees to qualify as a small business.
There are about 4 small manufacturers, including 3 electric vehicle
manufacturers, 8 independent commercial importers, and 9 alternative
fuel vehicle converters in the passenger car and light truck market
which are small businesses. We believe that the rulemaking would not
have a significant economic impact on these small vehicle manufacturers
because under 49 CFR part 525, passenger car manufacturers making fewer
than 10,000 vehicles per year can petition NHTSA to have alternative
standards set for those manufacturers. Manufacturers that produce only
electric vehicles, or that modify vehicles to make them electric or
some other kind of dedicated alternative fuel vehicle, will have
average fuel economy values far beyond
[[Page 75353]]
those proposed today, so we would not expect them to need a petition
for relief. A number of other small vehicle manufacturers already
petition the agency for relief under Part 525. If the standard is
raised, it has no meaningful impact on those manufacturers, because
they are expected to still go through the same process to petition for
relief. Given that there is already a mechanism for handling small
businesses, which is the purpose of the Regulatory Flexibility Act, a
regulatory flexibility analysis was not prepared, but we welcome
comments on this issue for the final rule.
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\842\ BMW, Daimler (Mercedes), Fiat/Chrysler (which also
includes Ferrari and Maserati for CAFE compliance purposes), Ford,
Geely (Volvo), General Motors, Honda, Hyundai, Kia, Lotus, Mazda,
Mitsubishi, Nissan, Porsche, Subaru, Suzuki, Tata (Jaguar Land
Rover), Toyota, and Volkswagen/Audi.
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4. Executive Order 13132 (Federalism)
Executive Order 13132 requires NHTSA to develop an accountable
process to ensure ``meaningful and timely input by State and local
officials in the development of regulatory policies that have
federalism implications.'' \843\ The Order defines the term ``Policies
that have federalism implications'' to include regulations that have
``substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government.'' Under
the Order, NHTSA may not issue a regulation that has federalism
implications, that imposes substantial direct compliance costs, and
that is not required by statute, unless the Federal government provides
the funds necessary to pay the direct compliance costs incurred by
State and local governments, or NHTSA consults with State and local
officials early in the process of developing the proposed regulation.
---------------------------------------------------------------------------
\843\ 64 FR 43255 (Aug. 10, 1999).
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NHTSA solicits comment on this proposed action from State and local
officials. The agency believes that it is unnecessary to address the
question of preemption further at this time because of the consistent
and coordinated Federal standards that would apply nationally under the
proposed National Program.
5. Executive Order 12988 (Civil Justice Reform)
Pursuant to Executive Order 12988, ``Civil Justice Reform,'' \844\
NHTSA has considered whether this rulemaking would have any retroactive
effect. This proposed rule does not have any retroactive effect.
---------------------------------------------------------------------------
\844\ 61 FR 4729 (Feb. 7, 1996).
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6. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires Federal agencies to prepare a written assessment of the costs,
benefits, and other effects of a proposed or final rule that includes a
Federal mandate likely to result in the expenditure by State, local, or
tribal governments, in the aggregate, or by the private sector, of more
than $100 million in any one year (adjusted for inflation with base
year of 1995). Adjusting this amount by the implicit gross domestic
product price deflator for 2009 results in $134 million (109.729/81.606
= 1.34). Before promulgating a rule for which a written statement is
needed, section 205 of UMRA generally requires NHTSA to identify and
consider a reasonable number of regulatory alternatives and adopt the
least costly, most cost-effective, or least burdensome alternative that
achieves the objectives of the rule. The provisions of section 205 do
not apply when they are inconsistent with applicable law. Moreover,
section 205 allows NHTSA to adopt an alternative other than the least
costly, most cost-effective, or least burdensome alternative if the
agency publishes with the final rule an explanation of why that
alternative was not adopted.
This proposed rule will not result in the expenditure by State,
local, or tribal governments, in the aggregate, of more than $134
million annually, but it will result in the expenditure of that
magnitude by vehicle manufacturers and/or their suppliers. In
developing this proposal, NHTSA considered a variety of alternative
average fuel economy standards lower and higher than those proposed.
NHTSA is statutorily required to set standards at the maximum feasible
level achievable by manufacturers based on its consideration and
balancing of relevant factors, and has tentatively concluded that the
proposed fuel economy standards are the maximum feasible standards for
the passenger car and light truck fleets for MYs 2017-2025 in light of
the statutory considerations.
7. Regulation Identifier Number
The Department of Transportation assigns a regulation identifier
number (RIN) to each regulatory action listed in the Unified Agenda of
Federal Regulations. The Regulatory Information Service Center
publishes the Unified Agenda in April and October of each year. You may
use the RIN contained in the heading at the beginning of this document
to find this action in the Unified Agenda.
8. Executive Order 13045
Executive Order 13045 \845\ applies to any rule that: (1) is
determined to be economically significant as defined under E.O. 12866,
and (2) concerns an environmental, health, or safety risk that NHTSA
has reason to believe may have a disproportionate effect on children.
If the regulatory action meets both criteria, we must evaluate the
environmental, health, or safety effects of the proposed rule on
children, and explain why the proposed regulation is preferable to
other potentially effective and reasonably foreseeable alternatives
considered by us.
---------------------------------------------------------------------------
\845\ 62 FR 19885 (Apr. 23, 1997).
---------------------------------------------------------------------------
Chapter 5 of NHTSA's DEIS notes that breathing PM can cause
respiratory ailments, heart attack, and arrhythmias (Dockery et al.
1993, Samet et al. 2000, Pope et al. 1995, 2002, 2004, Pope and Dockery
2006, Dominici et al. 2006, Laden et al. 2006, all in Ebi et al. 2008).
Populations at greatest risk could include children, the elderly, and
those with heart and lung disease, diabetes (Ebi et al. 2008), and high
blood pressure (K[uuml]nzli et al. 2005, in Ebi et al. 2008). Chronic
exposure to PM could decrease lifespan by 1 to 3 years (Pope 2000, in
American Lung Association 2008). Increasing PM concentrations are
expected to have a measurable adverse impact on human health
(Confalonieri et al. 2007).
Additionally, the DEIS notes that substantial morbidity and
childhood mortality has been linked to water- and food-borne diseases.
Climate change is projected to alter temperature and the hydrologic
cycle through changes in precipitation, evaporation, transpiration, and
water storage. These changes, in turn, potentially affect water-borne
and food-borne diseases, such as salmonellosis, campylobacter,
leptospirosis, and pathogenic species of vibrio. They also have a
direct impact on surface water availability and water quality. It has
been estimated that more than 1 billion people in 2002 did not have
access to adequate clean water (McMichael et al. 2003, in Epstein et
al. 2006). Increased temperatures, greater evaporation, and heavy rain
events have been associated with adverse impacts on drinking water
through increased waterborne diseases, algal blooms, and toxins (Chorus
and Bartram 1999, Levin et al. 2002, Johnson and Murphy 2004, all in
Epstein et al. 2006). A seasonal signature has been associated with
water-borne disease outbreaks (EPA 2009b). In the United States, 68
percent of all water-borne diseases between 1948 and 1994 were observed
after
[[Page 75354]]
heavy rainfall events (Curriero et al. 2001a, in Epstein et al. 2006).
Climate change could further impact a pathogen by directly
affecting its lifecycle (Ebi et al. 2008). The global increase in the
frequency, intensity, and duration of red tides could be linked to
local impacts already associated with climate change (Harvell et al.
1999, in Epstein et al. 2006); toxins associated with red tide directly
affect the nervous system (Epstein et al. 2006).
Many people do not report or seek medical attention for their
ailments of water-borne or food-borne diseases; hence, the number of
actual cases with these diseases is greater than clinical records
demonstrate (Mead et al. 1999, in Ebi et al. 2008). Many of the
gastrointestinal diseases associated with water-borne and food-borne
diseases can be self-limiting; however, vulnerable populations include
young children, those with a compromised immune system, and the
elderly.
Thus, as detailed in the DEIS, NHTSA has evaluated the
environmental, health, and safety effects of the proposed rule on
children. The DEIS also explains why the proposed regulation is
preferable to other potentially effective and reasonably foreseeable
alternatives considered by the agency.
9. National Technology Transfer and Advancement Act
Section 12(d) of the National Technology Transfer and Advancement
Act (NTTAA) requires NHTSA to evaluate and use existing voluntary
consensus standards in its regulatory activities unless doing so would
be inconsistent with applicable law (e.g., the statutory provisions
regarding NHTSA's vehicle safety authority) or otherwise
impractical.\846\
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\846\ 15 U.S.C. 272.
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Voluntary consensus standards are technical standards developed or
adopted by voluntary consensus standards bodies. Technical standards
are defined by the NTTAA as ``performance-based or design-specific
technical specification and related management systems practices.''
They pertain to ``products and processes, such as size, strength, or
technical performance of a product, process or material.''
Examples of organizations generally regarded as voluntary consensus
standards bodies include the American Society for Testing and Materials
(ASTM), the Society of Automotive Engineers (SAE), and the American
National Standards Institute (ANSI). If NHTSA does not use available
and potentially applicable voluntary consensus standards, we are
required by the Act to provide Congress, through OMB, an explanation of
the reasons for not using such standards.
There are currently no voluntary consensus standards relevant to
today's proposed CAFE standards.
10. Executive Order 13211
Executive Order 13211 \847\ applies to any rule that: (1) is
determined to be economically significant as defined under E.O. 12866,
and is likely to have a significant adverse effect on the supply,
distribution, or use of energy; or (2) that is designated by the
Administrator of the Office of Information and Regulatory Affairs
(OIRA) as a significant regulatory action. If the regulatory action
meets either criterion, we must evaluate the adverse energy effects of
the proposed rule and explain why the proposed regulation is preferable
to other potentially effective and reasonably foreseeable alternatives
considered by us.
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\847\ 66 FR 28355 (May 22, 2001).
---------------------------------------------------------------------------
The proposed rule seeks to establish passenger car and light truck
fuel economy standards that will reduce the consumption of petroleum
and will not have any adverse energy effects. Accordingly, this
proposed rulemaking action is not designated as a significant energy
action.
11. Department of Energy Review
In accordance with 49 U.S.C. 32902(j)(1), we submitted this
proposed rule to the Department of Energy for review. That Department
did not make any comments that we have not addressed.
12. Plain Language
Executive Order 12866 requires each agency to write all rules in
plain language. Application of the principles of plain language
includes consideration of the following questions:
Have we organized the material to suit the public's needs?
Are the requirements in the rule clearly stated?
Does the rule contain technical jargon that isn't clear?
Would a different format (grouping and order of sections,
use of headings, paragraphing) make the rule easier to understand?
Would more (but shorter) sections be better?
Could we improve clarity by adding tables, lists, or
diagrams?
What else could we do to make the rule easier to
understand?
If you have any responses to these questions, please include them
in your comments on this proposal.
13. Privacy Act
Anyone is able to search the electronic form of all comments
received into any of our dockets by the name of the individual
submitting the comment (or signing the comment, if submitted on behalf
of an organization, business, labor union, etc.). You may review DOT's
complete Privacy Act statement in the Federal Register (65 FR 19477-78,
April 11, 2000) or you may visit http://www.dot.gov/privacy.html.
List of Subjects
40 CFR Part 85
Confidential business information, Imports, Labeling, Motor vehicle
pollution, Reporting and recordkeeping requirements, Research,
Warranties.
40 CFR Part 86
Administrative practice and procedure, Confidential business
information, Incorporation by reference, Labeling, Motor vehicle
pollution, Reporting and recordkeeping requirements.
40 CFR Part 600
Administrative practice and procedure, Electric power, Fuel
economy, Incorporation by reference, Labeling, Reporting and
recordkeeping requirements.
49 CFR Parts 523, 531, and 533
Fuel Economy.
49 CFR Parts 536 and 537
Fuel economy, Reporting and recordkeeping requirements.
Environmental Protection Agency
40 CFR Chapter I
For the reasons set forth in the preamble, the Environmental
Protection Agency proposes to amend parts 85, 86, and 600 of title 40,
Chapter I of the Code of Federal Regulations as follows:
PART 85--CONTROL OF AIR POLLUTION FROM MOBILE SOURCES
1. The authority citation for part 86 continues to read as follows:
Authority: 42 U.S.C. 7401-7671q.
Subpart F--[Amended]
2. Section 85.525 is amended by adding paragraph (a)(2)(i)(D) to
read as follows:
Sec. 85.525 Applicable standards.
* * * * *
(a) * * *
[[Page 75355]]
(2) * * *
(i) * * *
(D) Optionally, compliance with greenhouse gas emission
requirements may be demonstrated by comparing the sum of CH4
plus N2O plus CO2 emissions from the before fuel
conversion FTP results to the after fuel conversion FTP results. This
comparison is based on test results from the emission data vehicle
(EDV) from the conversion test group at issue. The summation of the
post fuel conversion test results must be lower than the summation of
the before conversion greenhouse gas emission results. CO2
emissions are calculated as specified in 40 CFR 600.113-12.
CH4 and N2O emissions, before and after fuel
conversion, are adjusted by applying multiplicative factors of 25 and
298, respectively, to account for their increased global warming
potential. If statements of compliance are applicable and accepted in
lieu of measuring N2O, as permitted by EPA regulation, the
comparison of the greenhouse gas results also need not measure or
include N2O in the before and after emission comparisons.
* * * * *
PART 86--CONTROL OF EMISSIONS FROM NEW AND IN-USE HIGHWAY VEHICLES
AND ENGINES
3. The authority citation for part 86 continues to read as follows:
Authority: 42 U.S.C. 7401-7671q.
4. Section 86.1 is revised to read as follows:
Sec. 86.1 Reference materials.
(a) Certain material is incorporated by reference into this part
with the approval of the Director of the Federal Register under 5
U.S.C. 552(a) and 1 CFR part 51. To enforce any edition other than that
specified in this section, the Environmental Protection Agency must
publish a notice of the change in the Federal Register and the material
must be available to the public. All approved material is available for
inspection at U.S. EPA, Air and Radiation Docket and Information
Center, 1301 Constitution Ave. NW., Room B102, EPA West Building,
Washington, DC 20460, (202) 202-1744, and is available from the sources
listed below. It is also available for inspection at the National
Archives and Records Administration (NARA). For information on the
availability of this material at NARA, call (202) 741-6030, or go to:
http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html and is available from the sources
listed below:
(b) American Society for Testing and Materials, 100 Barr Harbor
Drive, P.O. Box C700, West Conshohocken, PA, 19428-2959, (610) 832-
9585, http://www.astm.org/.
(1) ASTM D 975-04c, Standard Specification for Diesel Fuel Oils,
IBR approved for Sec. Sec. 86.1910, 86.213-11.
(2) ASTM D1945-91, Standard Test Method for Analysis of Natural Gas
by Gas Chromatography, IBR approved for Sec. Sec. 86.113-94, 86.513-
94, 86.1213-94, 86.1313-94.
(3) ASTM D2163-91, Standard Test Method for Analysis of Liquefied
Petroleum (LP) Gases and Propane Concentrates by Gas Chromatography,
IBR approved for Sec. Sec. 86.113-94, 86.1213-94, 86.1313-94.
(4) ASTM D2986-95a, Reapproved 1999, Standard Practice for
Evaluation of Air Assay Media by the Monodisperse DOP (Dioctyl
Phthalate) Smoke Test, IBR approved for Sec. Sec. 86.1310-2007.
(5) ASTM D5186-91, Standard Test Method for Determination of
Aromatic Content of Diesel Fuels by Supercritical Fluid Chromatography,
IBR approved for Sec. Sec. 86.113-07, 86.1313-91, 86.1313-94, 86.1313-
98, 1313-2007.
(6) ASTM E29-67, Reapproved 1980, Standard Recommended Practice for
Indicating Which Places of Figures Are To Be Considered Significant in
Specified Limiting Values, IBR approved for Sec. 86.1105-87.
(7) ASTM E29-90, Standard Practice for Using Significant Digits in
Test Data to Determine Conformance with Specifications, IBR approved
for Sec. Sec. 86.609-84, 86.609-96, 86.609-97, 86.609-98, 86.1009-84,
86.1009-96, 86.1442, 86.1708-99, 86.1709-99, 86.1710-99, 86.1728-99.
(8) ASTM E29-93a, Standard Practice for Using Significant Digits in
Test Data to Determine Conformance with Specifications, IBR approved
for Sec. Sec. 86.098-15, 86.004-15, 86.007-11, 86.007-15, 86.1803-01,
86.1823-01, 86.1824-01, 86.1825-01, 86.1837-01.
(9) ASTM F1471-93, Standard Test Method for Air Cleaning
Performance of a High-Efficiency Particulate Air-Filter System, IBR
approved Sec. 86.1310-2007.
(10) ASTM E903-96, Standard Test Method for Solar Absorptance,
Reflectance, and Transmittance of Materials Using Integrating Spheres
(Withdrawn 2005), IBR approved for Sec. 86.1866-12.
(11) ASTM E1918-06, Standard Test Method for Measuring Solar
Reflectance of Horizontal and Low-Sloped Surfaces in the Field, IBR
approved for Sec. 86.1866-12.
(12) ASTM C1549-09, Standard Test Method for Determination of Solar
Reflectance Near Ambient Temperature Using a Portable Solar
Reflectometer (2009) IBR approved for Sec. 86.1866-12.
(c) Society of Automotive Engineers, 400 Commonwealth Dr.,
Warrendale, PA 15096-0001, (877) 606-7323 (U.S. and Canada) or (724)
776-4970 (outside the U.S. and Canada), http://www.sae.org.
(1) SAE J1151, December 1991, Methane Measurement Using Gas
Chromatography, 1994 SAE Handbook--SAE International Cooperative
Engineering Program, Volume 1: Materials, Fuels, Emissions, and Noise;
Section 13 and page 170 (13.170), IBR approved for Sec. Sec. 86.111-
94; 86.1311-94.
(2) SAE J1349, June 1990, Engine Power Test Code--Spark Ignition
and Compression Ignition, IBR approved for Sec. Sec. 86.094-8, 86.096-
8.
(3) SAE J1850, July 1995, Class B Data Communication Network
Interface, IBR approved for Sec. Sec. 86.099-17, 86.1806-01.
(4) SAE J1850, Revised May 2001, Class B Data Communication Network
Interface, IBR approved for Sec. Sec. 86.005-17, 86.007-17, 86.1806-
04, 86.1806-05.
(5) SAE J1877, July 1994, Recommended Practice for Bar-Coded
Vehicle Identification Number Label, IBR approved for Sec. Sec.
86.095-35, 86.1806-01.
(6) SAE J1892, October 1993, Recommended Practice for Bar-Coded
Vehicle Emission Configuration Label, IBR approved for Sec. Sec.
86.095-35, 86.1806-01.
(7) SAE J1930, Revised May 1998, Electrical/Electronic Systems
Diagnostic Terms, Definitions, Abbreviations, and Acronyms, IBR
approved for Sec. Sec. 86.096-38, 86.004-38, 86.007-38, 86.010-38,
86.1808-01, 86.1808-07.
(8) SAE J1930, Revised April 2002, Electrical/Electronic Systems
Diagnostic Terms, Definitions, Abbreviations, and Acronyms--Equivalent
to ISO/TR 15031-2: April 30, 2002, IBR approved for Sec. Sec. 86.005-
17, 86.007-17, 86.010-18, 86.1806-04, 86.1806-05.
(9) SAE J1937, November 1989, Engine Testing with Low Temperature
Charge Air Cooler Systems in a Dynamometer Test Cell, IBR approved for
Sec. Sec. 86.1330-84, 86.1330-90.
(10) SAE J1939, Revised October 2007, Recommended Practice for a
Serial Control and Communications Vehicle Network, IBR approved for
Sec. Sec. 86.010-18.
(11) SAE J1939-11, December 1994, Physical Layer--250K bits/s,
Shielded Twisted Pair, IBR approved for Sec. Sec. 86.005-17, 86.1806-
05.
[[Page 75356]]
(12) SAE J1939-11, Revised October 1999, Physical Layer--250K bits/
s, Shielded Twisted Pair, IBR approved for Sec. Sec. 86.005-17,
86.007-17, 86.1806-04, 86.1806-05.
(13) SAE J1939-13, July 1999, Off-Board Diagnostic Connector, IBR
approved for Sec. Sec. 86.005-17, 86.007-17, 86.1806-04, 86.1806-05.
(14) SAE J1939-13, Revised March 2004, Off-Board Diagnostic
Connector, IBR approved for Sec. 86.010-18.
(15) SAE J1939-21, July 1994, Data Link Layer, IBR approved for
Sec. Sec. 86.005-17, 86.1806-05.
(16) SAE J1939-21, Revised April 2001, Data Link Layer, IBR
approved for Sec. Sec. 86.005-17, 86.007-17, 86.1806-04, 86.1806-05.
(17) SAE J1939-31, Revised December 1997, Network Layer, IBR
approved for Sec. Sec. 86.005-17, 86.007-17, 86.1806-04, 86.1806-05.
(18) SAE J1939-71, May 1996, Vehicle Application Layer, IBR
approved for Sec. Sec. 86.005-17, 86.1806-05.
(19) SAE J1939-71, Revised August 2002, Vehicle Application Layer--
J1939-71 (through 1999), IBR approved for Sec. Sec. 86.005-17, 86.007-
17, 86.1806-04, 86.1806-05.
(20) SAE J1939-71, Revised January 2008, Vehicle Application Layer
(Through February 2007), IBR approved for Sec. 86.010-38.
(21) SAE J1939-73, February 1996, Application Layer--Diagnostics,
IBR approved for Sec. Sec. 86.005-17, 86.1806-05.
(22) SAE J1939-73, Revised June 2001, Application Layer--
Diagnostics, IBR approved for Sec. Sec. 86.005-17, 86.007-17, 86.1806-
04, 86.1806-05.
(23) SAE J1939-73, Revised September 2006, Application Layer--
Diagnostics, IBR approved for Sec. Sec. 86.010-18, 86.010-38.
(24) SAE J1939-81, July 1997, Recommended Practice for Serial
Control and Communications Vehicle Network Part 81--Network Management,
IBR approved for Sec. Sec. 86.005-17, 86.007-17, 86.1806-04, 86.1806-
05.
(25) SAE J1939-81, Revised May 2003, Network Management, IBR
approved for Sec. 86.010-38.
(26) SAE J1962, January 1995, Diagnostic Connector, IBR approved
for Sec. Sec. 86.099-17, 86.1806-01.
(27) SAE J1962, Revised April 2002, Diagnostic Connector Equivalent
to ISO/DIS 15031-3; December 14, 2001, IBR approved for Sec. Sec.
86.005-17, 86.007-17, 86.010-18, 86.1806-04, 86.1806-05.
(28) SAE J1978, Revised April 2002, OBD II Scan Tool--Equivalent to
ISO/DIS 15031-4; December 14, 2001, IBR approved for Sec. Sec. 86.005-
17, 86.007-17, 86.010-18, 86.1806-04, 86.1806-05.
(29) SAE J1979, July 1996, E/E Diagnostic Test Modes, IBR approved
for Sec. Sec. 86.099-17, 86.1806-01.
(30) SAE J1979, Revised September 1997, E/E Diagnostic Test Modes,
IBR approved for Sec. Sec. 86.096-38, 86.004-38, 86.007-38, 86.010-38,
86.1808-01, 86.1808-07.
(31) SAE J1979, Revised April 2002, E/E Diagnostic Test Modes--
Equivalent to ISO/DIS 15031-5; April 30, 2002, IBR approved for
Sec. Sec. 86.099-17, 86.005-17, 86.007-17, 86.1806-01, 86.1806-04,
86.1806-05.
(32) SAE J1979, Revised May 2007, (R) E/E Diagnostic Test Modes,
IBR approved for Sec. 86.010-18, 86.010-38.
(33) SAE J2012, July 1996, Recommended Practice for Diagnostic
Trouble Code Definitions, IBR approved for Sec. Sec. 86.099-17,
86.1806-01.
(34) SAE J2012, Revised April 2002, (R) Diagnostic Trouble Code
Definitions Equivalent to ISO/DIS 15031-6: April 30, 2002, IBR approved
for Sec. Sec. 86.005-17, 86.007-17, 86.010-18, 86.1806-04, 86.1806-05.
(35) SAE J2284-3, May 2001, High Speed CAN (HSC) for Vehicle
Applications at 500 KBPS, IBR approved for Sec. Sec. 86.096-38,
86.004-38, 86.007-38, 86.010-38, 86.1808-01, 86.1808-07.
(36) SAE J2403, Revised August 2007, Medium/Heavy-Duty E/E Systems
Diagnosis Nomenclature--Truck and Bus, IBR approved for Sec. Sec.
86.007-17, 86.010-18, 86.010-38, 86.1806-05.
(37) SAE J2534, February 2002, Recommended Practice for Pass-Thru
Vehicle Programming, IBR approved for Sec. Sec. 86.096-38, 86.004-38,
86.007-38, 86.010-38, 86.1808-01, 86.1808-07.
(38) SAE J2534-1, Revised December 2004, (R) Recommended Practice
for Pass-Thru Vehicle Programming, IBR approved for Sec. 86.010-38.
(39) SAE J2064, Revised December 2005, R134a Refrigerant Automotive
Air-Conditioned Hose, IBR approved for Sec. 86.166-12.
(40) SAE J2765, October, 2008, Procedure for Measuring System COP
[Coefficient of Performance] of a Mobile Air Conditioning System on a
Test Bench, IBR approved for Sec. 86.1866-12.
(41) SAE J1711, Recommended Practice for Measuring the Exhaust
Emissions and Fuel Economy of Hybrid-Electric Vehicles, Including Plug-
In Hybrid Vehicles, June 2010, IBR approved for Sec. 86.1811-04(n).
(42) SAE J1634, Electric Vehicle Energy Consumption and Range Test
Procedure, Cancelled October 2002, IBR approved for Sec. 86.1811-
04(n).
(43) SAE J1100, November, 2009, Motor Vehicle Dimensions, IBR
approved for Sec. 86.1866-12(d).
(44) SAE J2064, Revised December 2005, R134a Refrigerant Automotive
Air-Conditioned Hose, IBR approved for Sec. 86.166-12(d).
(d) American National Standards Institute, 25 W 43rd Street, 4th
Floor, New York, NY 10036, (212) 642-4900, http://www.ansi.org.
(1) ANSI/AGA NGV1-1994, Standard for Compressed Natural Gas Vehicle
(NGV) Fueling Connection Devices, IBR approved for Sec. Sec. 86.001-9,
86.004-9, 86.098-8, 86.099-8, 86.099-9, 86.1810-01.
(2) [Reserved]
(e) California Air Resources Board, (916) 322-2884, http://www.arb.ca.gov.
(1) California Regulatory Requirements Applicable to the ``LEV II''
Program, including:
(i) [Reserved]
(ii) California Non-Methane Organic Gas Test Procedures, August 5,
1999, IBR approved for Sec. Sec. 86.1803-01, 86.1810-01, 86.1811-04.
(2) California Regulatory Requirements Applicable to the National
Low Emission Vehicle Program, October 1996, IBR approved for Sec. Sec.
86.113-04, 86.612-97, 86.1012-97, 86.1702-99, 86.1708-99, 86.1709-99,
86.1717-99, 86.1735-99, 86.1771-99, 86.1775-99, 86.1776-99, 86.1777-99,
Appendix XVI, Appendix XVII.
(3) California Regulatory Requirements known as On-board
Diagnostics II (OBD-II), Approved on April 21, 2003, Title 13,
California Code Regulations, Section 1968.2, Malfunction and Diagnostic
System Requirements for 2004 and Subsequent Model-Year Passenger Cars,
Light-Duty Trucks, and Medium-Duty Vehicles and Engines (OBD-II), IBR
approved for Sec. 86.1806-05.
(4) California Regulatory Requirements known as On-board
Diagnostics II (OBD-II), Approved on November 9, 2007, Title 13,
California Code Regulations, Section 1968.2, Malfunction and Diagnostic
System Requirements for 2004 and Subsequent Model-Year Passenger Cars,
Light-Duty Trucks, and Medium-Duty Vehicles and Engines (OBD-II), IBR
approved for Sec. Sec. 86.007-17, 86.1806-05.
(f) International Organization for Standardization, Case Postale
56, CH-1211 Geneva 20, Switzerland, 41-22-749-01-11, http://www.iso.org.
(1) ISO 9141-2, February 1, 1994, Road vehicles--Diagnostic
systems--Part 2: CARB requirements for interchange of digital
information, IBR approved for Sec. Sec. 86.099-17, 86.005-17, 86.007-
17, 86.1806-01, 86.1806-04, 86.1806-05.
(2) ISO 14230-4:2000(E), June 1, 2000, Road vehicles--Diagnostic
systems--
[[Page 75357]]
KWP 2000 requirements for Emission-related systems, IBR approved for
Sec. Sec. 86.099-17, 86.005-17, 86.007-17, 86.1806-01, 86.1806-04,
86.1806-05.
(3) ISO 15765-4.3:2001, December 14, 2001, Road Vehicles--
Diagnostics on Controller Area Networks (CAN)--Part 4: Requirements for
emissions-related systems, IBR approved for Sec. Sec. 86.005-17,
86.007-17, 86.1806-04, 86.1806-05.
(4) ISO 15765-4:2005(E), January 15, 2005, Road Vehicles--
Diagnostics on Controller Area Networks (CAN)--Part 4: Requirements for
emissions-related systems, IBR approved for Sec. Sec. 86.007-17,
86.010-18, 86.1806-05.
(5) ISO 13837:2008, May 30, 2008, Road Vehicles--Safety glazing
materials. Method for the determination of solar transmittance, IBR
approved for Sec. 86.1866-12.
(g) Government Printing Office, Washington, DC 20402, (202) 512-
1800 http://www.nist.gov.
(1) NIST Special Publication 811, 1995 Edition, Guide for the Use
of the International System of Units (SI), IBR approved for Sec.
86.1901.
(2) [Reserved]
(h) Truck and Maintenance Council, 950 North Glebe Road, Suite 210,
Arlington, VA 22203-4181, (703) 838-1754.
(1) TMC RP 1210B, Revised June 2007, WINDOWSTMCOMMUNICATION API,
IBR approved for Sec. 86.010-38.
(2) [Reserved]
(i) U.S. EPA, Office of Air and Radiation, 2565 Plymouth Road, Ann
Arbor, MI 48105, http://www.epa.gov:
(1) EPA Vehicle Simulation Tool, Version x.x, November 2011; IBR
approved for Sec. 86.1866-12. The computer code for this model is
available as noted in paragraph (a) of this section. A working version
of this software is also available for download at http://www.epa.gov/otaq/climate/ldst.htm.
(2) [Reserved]
Subpart B--[Amended]
5. Section 86.111-94 is amended by revising paragraph (b)
introductory text to read as follows:
Sec. 86.111-94 Exhaust gas analytical system.
* * * * *
(b) Major component description. The exhaust gas analytical system,
Figure B94-7, consists of a flame ionization detector (FID) (heated,
235 [deg]15[emsp14][deg]F (113 [deg]8 [deg]C)
for methanol-fueled vehicles) for the determination of THC, a methane
analyzer (consisting of a gas chromatograph combined with a FID) for
the determination of CH4,non-dispersive infrared analyzers
(NDIR) for the determination of CO and CO2, a
chemiluminescence analyzer (CL) for the determination of
NOX, and an analyzer meeting the requirements specified in
40 CFR 1065.275 for the determination of N2O. A heated flame
ionization detector (HFID) is used for the continuous determination of
THC from petroleum-fueled diesel-cycle vehicles (may also be used with
methanol-fueled diesel-cycle vehicles), Figure B94-5 (or B94-6). The
analytical system for methanol consists of a gas chromatograph (GC)
equipped with a flame ionization detector. The analysis for
formaldehyde is performed using high-pressure liquid chromatography
(HPLC) of 2,4-dinitrophenylhydrazine (DNPH) derivatives using
ultraviolet (UV) detection. The exhaust gas analytical system shall
conform to the following requirements:
* * * * *
6. Section 86.135-12 is amended by revising paragraph (a) to read
as follows:
Sec. 86.135-12 Dynamometer procedure.
(a) Overview. The dynamometer run consists of two tests, a ``cold''
start test, after a minimum 12-hour and a maximum 36-hour soak
according to the provisions of Sec. Sec. 86.132 and 86.133, and a
``hot'' start test following the ``cold'' start by 10 minutes. Engine
startup (with all accessories turned off), operation over the UDDS, and
engine shutdown make a complete cold start test. Engine startup and
operation over the first 505 seconds of the driving schedule complete
the hot start test. The exhaust emissions are diluted with ambient air
in the dilution tunnel as shown in Figure B94-5 and Figure B94-6. A
dilution tunnel is not required for testing vehicles waived from the
requirement to measure particulates. Six particulate samples are
collected on filters for weighing; the first sample plus backup is
collected during the first 505 seconds of the cold start test; the
second sample plus backup is collected during the remainder of the cold
start test (including shutdown); the third sample plus backup is
collected during the hot start test. Continuous proportional samples of
gaseous emissions are collected for analysis during each test phase.
For gasoline-fueled, natural gas-fueled and liquefied petroleum gas-
fueled Otto-cycle vehicles, the composite samples collected in bags are
analyzed for THC, CO, CO2, CH4, NOX,
and N2O. For petroleum-fueled diesel-cycle vehicles
(optional for natural gas-fueled, liquefied petroleum gas-fueled and
methanol-fueled diesel-cycle vehicles), THC is sampled and analyzed
continuously according to the provisions of Sec. 86.110-94. Parallel
samples of the dilution air are similarly analyzed for THC, CO,
CO2, CH4, NOX, and N2O. For
natural gas-fueled, liquefied petroleum gas-fueled and methanol-fueled
vehicles, bag samples are collected and analyzed for THC (if not
sampled continuously), CO, CO2, CH4,
NOX, and N2O. For methanol-fueled vehicles,
methanol and formaldehyde samples are taken for both exhaust emissions
and dilution air (a single dilution air formaldehyde sample, covering
the total test period may be collected). For ethanol-fueled vehicles,
methanol, ethanol, acetaldehyde, and formaldehyde samples are taken for
both exhaust emissions and dilution air (a single dilution air
formaldehyde sample, covering the total test period may be collected).
Parallel bag samples of dilution air are analyzed for THC, CO,
CO2, CH4, NOX, and N2O.
* * * * *
7. Section 86.165-12 is amended by revising paragraphs (c)(1) and
(2) to read as follows:
Sec. 86.165-12 Air conditioning idle test procedure.
* * * * *
(c) * * *
(1) Ambient humidity within the test cell during all phases of the
test sequence shall be controlled to an average of 40-60 grains of
water/pound of dry air.
(2) Ambient air temperature within the test cell during all phases
of the test sequence shall be controlled to 73-80[emsp14][deg]F on
average and 75 5[emsp14][deg]F as an instantaneous
measurement. Air temperature shall be recorded continuously at a
minimum of 30 second intervals.
* * * * *
8. Section 86.166-12 is amended as follows:
a. By revising paragraph (b) introductory text.
b. By revising paragraph (b).
c. By revising paragraph (d).
Sec. 86.166-12 Method for calculating emissions due to air
conditioning leakage.
* * * * *
(b) Rigid pipe connections. For 2017 and later model years,
manufacturers may test the leakage of system connections by
pressurizing the system with Helium and using a mass spectrometer to
measure the leakage of the connections within the system. Connections
that are demonstrated to be free of leaks using Helium mass
spectrometry are considered to have a relative emission factor of 10
and are
[[Page 75358]]
accounted for separately in the equation in paragraph (b)(2) of this
section.
(1) The following equation shall be used for the 2012 through 2016
model years, and for 2017 and later model years in cases where the
connections are not demonstrated to be leak-free using Helium mass
spectrometry:
Grams/YRRP = 0.00522 x [(125 x SO) + (75 x SCO) + (50 x MO)
+ (10 x SW) + (5 x SWO) + (MG)]
Where:
Grams/YRRP = Total emission rate for rigid pipe
connections in grams per year.
SO = The number of single O-ring connections.
SCO = The number of single captured O-ring connections.
MO = The number of multiple O-ring connections.
SW = The number of seal washer connections.
SWO = The number of seal washer with O-ring connections.
MG = The number of metal gasket connections.
(2) For 2017 and later model years, manufacturers may test the
leakage of system connections by pressurizing the system with Helium
and using a mass spectrometer to measure the leakage of the connections
within the system. Connections that are demonstrated to be free of
leaks using Helium mass spectrometry are considered to have a relative
emission factor of 10 and are accounted for separately in the following
equation:
Grams/YRRP = 0.00522 x [(125 x SO) + (75 x SCO) + (50 x MO)
+ (10 x SW) + (10 x LTO) + (5 x SWO) + (MG)]
Where:
Grams/YRRP = Total emission rate for rigid pipe
connections in grams per year.
SO = The number of single O-ring connections.
SCO = The number of single captured O-ring connections.
MO = The number of multiple O-ring connections.
SW = The number of seal washer connections.
LTO = The total number of O-ring connections (single, single
captured, and multiple) that have demonstrated no leakage using
Helium mass spectrometry. Connections included here should not be
counted elsewhere in the equation, and all connections counted here
must be tested using Helium mass spectrometry and demonstrated as
free of leaks.
SWO = The number of seal washer with O-ring connections.
MG = The number of metal gasket connections.
* * * * *
(d) Flexible hoses. Determine the permeation emission rate in grams
per year for each segment of flexible hose using the following
equation, and then sum the values for all hoses in the system to
calculate a total flexible hose emission rate for the system. Hose end
connections shall be included in the calculations in paragraph (b) of
this section.
Grams/YRFH = 0.00522 x (3.14159 x ID x L x ER)
Where:
Grams/YRFH = Emission rate for a segment of flexible hose
in grams per year.
ID = Inner diameter of hose, in millimeters.
L = Length of hose, in millimeters.
ER = Emission rate per unit internal surface area of the hose, in g/
mm\2\, selected from the following table, or, for 2017 and later
model years, calculated according to SAE J2064 ``R134a Refrigerant
Automotive Air-Conditioned Hose'' (incorporated by reference; see
86.1):
[GRAPHIC] [TIFF OMITTED] TP01DE11.280
* * * * *
9. Section 86.167-17 is added to read as follows:
Sec. 86.167-17 AC17 Air Conditioning Efficiency Test Procedure.
(a) Overview. The dynamometer operation consists of four elements:
a pre-conditioning cycle, a 30-minute soak period under simulated solar
heat, an SC03 drive cycle, and a Highway Fuel Economy Test (HFET) drive
cycle. The vehicle is preconditioned with the UDDS to bring the vehicle
to a warmed-up stabilized condition. This preconditioning is followed
by a 30 minute vehicle soak (engine off) that proceeds directly into
the SC03 driving schedule, during which continuous proportional samples
of gaseous emissions are collected for analysis. The SC03 driving
schedule is followed immediately by the HFET cycle, during which
continuous proportional samples of gaseous emissions are collected for
analysis. The entire test, including the preconditioning driving,
vehicle soak, and SC03 and HFET official test cycles, is conducted in
an environmental test facility. The environmental test facility must be
capable of providing the following nominal ambient test conditions of:
77[emsp14][deg]F air temperature, 50 percent relative humidity, a solar
heat load intensity of 850 W/m\2\, and vehicle cooling air flow
proportional to vehicle speed. Section 86.161-00 discusses the minimum
facility requirements and corresponding control tolerances for air
conditioning ambient test conditions. The entire test sequence is run
twice; with and without the vehicle's air conditioner operating during
the SC03 and HFET test cycles. For gasoline-fueled Otto-cycle vehicles,
the composite samples collected in bags are analyzed for THC, CO,
CO2, and CH4. For petroleum-fueled diesel-cycle
vehicles, THC is sampled and analyzed continuously according to the
provisions of Sec. 86.110. Parallel bag samples of dilution air are
analyzed for THC, CO, CO2, and CH4. The following
figure shows the basic sequence of the test procedure.
BILLING CODE 4910-59-P
[[Page 75359]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.281
BILLING CODE 4910-59-C
(b) Dynamometer requirements. (1) Tests shall be run on a large
single roll electric dynamometer or an equivalent dynamometer
configuration that satisfies the requirements of Sec. 86.108-00.
(2) Position (vehicle can be driven) the test vehicle on the
dynamometer and restrain.
(3) Required dynamometer inertia weight class selections are
determined by the test vehicle's test weight basis and corresponding
equivalent weight as listed in the tabular information of Sec. 86.129-
00(a) and discussed in Sec. 86.129-00(e) and (f).
(4) Set the dynamometer test inertia weight and roadload horsepower
requirements for the test vehicle (see Sec. 86.129-00 (e) and (f)).
The dynamometer's horsepower adjustment settings shall be set such that
the force imposed during dynamometer operation matches actual road load
force at all speeds.
(5) The vehicle speed as measured from the dynamometer rolls shall
be used. A speed vs. time recording, as evidence of dynamometer test
validity, shall be supplied at request of the Administrator.
(6) The drive wheel tires may be inflated up to a gauge pressure of
45 psi (310 kPa), or the manufacturer's recommended pressure if higher
than 45 psi, in order to prevent tire damage. The drive wheel tire
pressure shall be reported with the test results.
(7) The driving distance, as measured by counting the number of
[[Page 75360]]
dynamometer roll or shaft revolutions, shall be determined for the
test.
(8) Four-wheel drive and all-wheel drive vehicles may be tested
either in a four-wheel drive or a two-wheel drive mode of operation. In
order to test in the two-wheel drive mode, four-wheel drive and all-
wheel drive vehicles may have one set of drive wheels disengaged; four-
wheel and all-wheel drive vehicles which can be shifted to a two-wheel
mode by the driver may be tested in a two-wheel drive mode of
operation.
(c) Test cell ambient conditions. (1) Ambient air temperature. (i)
Ambient air temperature is controlled, within the test cell, during all
phases of the test sequence to 77 2[emsp14][deg]F on
average and 77 5[emsp14][deg]F as an instantaneous
measurement.
(ii) Air temperature is recorded continuously at a minimum of 30
second intervals. Records of cell air temperatures and values of
average test temperatures are maintained by the manufacturer for all
certification related programs.
(2) Ambient humidity. (i) Ambient humidity is controlled, within
the test cell, during all phases of the test sequence to an average of
69 5 grains of water/pound of dry air.
(ii) Humidity is recorded continuously at a minimum of 30 second
intervals. Records of cell humidity and values of average test humidity
are maintained by the manufacturer for all certification related
programs.
(3) Solar heat loading. The requirements of 86.161-00(d) regarding
solar heat loading specifications shall apply. The solar load of 850 W/
m\2\ is applied only during specified portions of the test sequence.
(d) Interior temperature measurement. The interior temperature of
the vehicle shall be measured during the emission sampling phases of
the test(s).
(1) Interior temperatures shall be measured by placement of
thermocouples at the following locations:
(i) The outlet of the center duct on the dash.
(ii) Behind the driver and passenger seat headrests. The location
of the temperature measuring devices shall be 30 mm behind each
headrest and 330 mm below the roof.
(2) The temperature at each location shall be recorded a minimum of
every 5 seconds.
(e) Air conditioning system settings. For the portion of the test
where the air conditioner is required to be operating the settings
shall be as follows:
(1) Automatic systems shall be set to automatic and the temperature
control set to 72 deg F.
(2) Manual systems shall be set at the start of the SC03 drive
cycle to full cool with the fan on the highest setting and the airflow
setting to ``recirculation.'' Within the first idle period of the SC03
drive cycle (186 to 204 seconds) the fan speed shall be reduced to the
setting closest to 6 volts at the motor, the temperature setting shall
be adjusted to provide 55 deg F at the center dash air outlet, and the
airflow setting changed to ``outside air.''
(f) Vehicle and test activities. The AC17 air conditioning test in
an environmental test cell is composed of the following sequence of
activities.
(1) Drain and fill the vehicle's fuel tank to 40 percent capacity
with test fuel. If a vehicle has gone through the drain and fuel
sequence less than 72 hours previously and has remained under
laboratory ambient temperature conditions, this drain and fill
operation can be omitted (see Sec. 86.132-00(c)(2)(ii)).
(2)(i) Position the variable speed cooling fan in front of the test
vehicle with the vehicle's hood down. This air flow should provide
representative cooling at the front of the test vehicle (air
conditioning condenser and engine) during the driving cycles. See Sec.
86.161-00(e) for a discussion of cooling fan specifications.
(ii) In the case of vehicles with rear engine compartments (or if
this front location provides inadequate engine cooling), an additional
cooling fan shall be placed in a position to provide sufficient air to
maintain vehicle cooling. The fan capacity shall normally not exceed
5300 cfm (2.50 m\3\/s). If, however, it can be demonstrated that during
road operation the vehicle receives additional cooling, and that such
additional cooling is needed to provide a representative test, the fan
capacity may be increased or additional fans used if approved in
advance by the Administrator.
(3) Open all vehicle windows.
(4) Connect the emission test sampling system to the vehicle's
exhaust tail pipe(s).
(5) Set the environmental test cell ambient test conditions to the
conditions defined in paragraph (c) of this section, except that the
solar heat shall be off.
(6) Set the air conditioning system controls to off.
(7) Start the vehicle (with air conditioning system off) and
conduct a preconditioning EPA urban dynamometer driving cycle (Sec.
86.115).
(i) If engine stalling should occur during any air conditioning
test cycle operation, follow the provisions of Sec. 86.136-90 (Engine
starting and restarting).
(ii) For manual transmission vehicles, the vehicle shall be shifted
according the provisions of Sec. 86.128-00.
(8) Following the preconditioning cycle, the test vehicle and
cooling fan(s) are turned off, all windows are rolled up, and the
vehicle is allowed to soak in the ambient conditions of paragraph
(c)(1) of this section for 30 1 minutes. The solar heat
system must be turned on and generating 850 W/m \2\ within 1 minute of
turning the engine off.
(9) Air conditioning on test. (i) Start engine (with air
conditioning system also running). Fifteen seconds after the engine
starts, place vehicle in gear.
(ii) Eighteen seconds after the engine starts, begin the initial
vehicle acceleration of the SC03 driving schedule.
(iii) Operate the vehicle according to the SC03 driving schedule,
as described in appendix I, paragraph (h), of this part, while sampling
the exhaust gas.
(iv) At the end of the deceleration which is scheduled to occur at
594 seconds, simultaneously switch the sample flows from the SC03 bags
and samples to the ``HFET'' bags and samples, switch off gas flow
measuring device No. 1, switch off the No. 1 petroleum-fueled diesel
hydrocarbon integrator, mark the petroleum-fueled diesel hydrocarbon
recorder chart, and start gas flow measuring device No. 2, and start
the petroleum-fueled diesel hydrocarbon integrator No. 2.
(v) Allow the vehicle to idle for 14-16 seconds. Before the end of
this idle period, record the measured roll or shaft revolutions and
reset the counter or switch to a second counter. As soon as possible
transfer the SC03 exhaust and dilution air samples to the analytical
system and process the samples according to Sec. 86.140 obtaining a
stabilized reading of the bag exhaust sample on all analyzers within 20
minutes of the end of the sample collection phase of the test. Obtain
methanol and formaldehyde sample analyses, if applicable, within 24
hours of the end of the sample collection phase of the test.
(vi) Operate the vehicle according to the HFET driving schedule, as
described in 40 CFR 600.109-08, while sampling the exhaust gas.
(vii) Turn the engine off 2 seconds after the end of the last
deceleration.
(viii) Five seconds after the engine stops running, simultaneously
turn off gas flow measuring device No. 2 and if applicable, turn off
the petroleum-fueled diesel hydrocarbon integrator No. 2, mark the
hydrocarbon recorder chart, and position the sample selector valves
[[Page 75361]]
to the ``standby'' position. Record the measured roll or shaft
revolutions (both gas meter or flow measurement instrumentation
readings), and re-set the counter. As soon as possible, transfer the
``HFET'' exhaust and dilution air samples to the analytical system and
process the samples according to Sec. 86.140, obtaining a stabilized
reading of the exhaust bag sample on all analyzers within 20 minutes of
the end of the sample collection phase of the test. Obtain methanol and
formaldehyde sample analyses, if applicable, within 24 hours of the end
of the sample period.
(10) Air conditioning off test. The air conditioning off test is
identical to the steps identified in paragraphs (d)(1) through (9) of
this section, except that the air conditioning system and fan speeds
are set to complete off or the lowest. It is preferred that the air
conditioning off test be conducted sequentially after the air
conditioning on test, following a 10-15 minute soak.
(g) Records required and reporting requirements. For each test the
manufacturer shall record the information specified in 86.142-90.
Emission results must be reported for each phase of the test. The
manufacturer must also report the following information for each
vehicle tested: vehicle class, model type, carline, curb weight engine
displacement, transmission class and configuration, interior volume,
climate control system type and characteristics, refrigerant used,
compressor type, and evaporator/condenser characteristics.
Subpart S--[Amended]
10. Section 86.1801-12 is amended by revising paragraphs (b), (j),
and (k) introductory text to read as follows:
Sec. 86.1801-12 Applicability.
* * * * *
(b) Clean alternative fuel conversions. The provisions of this
subpart apply to clean alternative fuel conversions as defined in 40
CFR 85.502, of all model year light-duty vehicles, light-duty trucks,
medium duty passenger vehicles, and complete Otto-cycle heavy-duty
vehicles.
(j) Exemption from greenhouse gas emission standards for small
businesses. (1) Manufacturers that qualify as a small business under
the Small Business Administration regulations in 13 CFR part 121 are
exempt from the greenhouse gas emission standards specified in Sec.
86.1818-12 and in associated provisions in this part and in part 600 of
this chapter. This exemption applies to both U.S.-based and non-U.S.-
based businesses. The following categories of businesses (with their
associated NAICS codes) may be eligible for exemption based on the
Small Business Administration size standards in 13 CFR 121.201.
(i) Vehicle manufacturers (NAICS code 336111).
(ii) Independent commercial importers (NAICS codes 811111, 811112,
811198, 423110, 424990, and 441120).
(iii) Alternate fuel vehicle converters (NAICS codes 335312,
336312, 336322, 336399, 454312, 485310, and 811198).
(2) Effective for the 2014 and later model years, a manufacturer
that would otherwise be exempt under the provisions of paragraph (j)(1)
of this section may optionally comply with the greenhouse gas emission
standards specified in Sec. 86.1818. A manufacturer making this choice
is required to comply with all the applicable standards and provisions
in Sec. 86.1818 and in associated provisions in this part and in part
600 of this chapter. Manufacturers may optionally earn early credits in
the 2012 and/or 2013 model years by demonstrating CO2
emission levels below the fleet average CO2 standard that
would have been applicable in those model years if the manufacturer had
not been exempt. Manufacturers electing to earn these early credits
must comply with the model year reporting requirements in Sec.
600.512-12 for each model year.
(k) Conditional exemption from greenhouse gas emission standards.
Manufacturers meeting the eligibility requirements described in
paragraphs (k)(1) and (2) of this section may request a conditional
exemption from compliance with the emission standards described in
Sec. 86.1818-12(c) through (e) and associated provisions in this part
and in part 600 of this chapter. A conditional exemption under this
paragraph (k) may be requested for the 2012 through 2016 model years.
The terms ``sales'' and ``sold'' as used in this paragraph (k) shall
mean vehicles produced and delivered for sale (or sold) in the states
and territories of the United States. For the purpose of determining
eligibility the sales of related companies shall be aggregated
according to the provisions of Sec. 86.1838-01(b)(3).
* * * * *
11. Section 86.1803-01 is amended as follows:
a. By revising the definition for ``footprint.''
b. By adding a definition for ``good engineering judgment.''
c. By adding a definition for ``gross combination weight rating.''
d. By revising the definition for ``gross vehicle weight rating.''
e. By adding a definition for ``platform.''
The revisions and additions read as follows:
Sec. 86.1803-01 Definitions.
* * * * *
Footprint is the product of average track width (rounded to the
nearest tenth of an inch) and wheelbase (measured in inches and rounded
to the nearest tenth of an inch), divided by 144 and then rounded to
the nearest tenth of a square foot, where the average track width is
the average of the front and rear track widths, where each is measured
in inches and rounded to the nearest tenth of an inch.
* * * * *
Good engineering judgment has the meaning given in 40 CFR 1068.30.
See 40 CFR 1068.5 for the administrative process we use to evaluate
good engineering judgment.
Gross combination weight rating (GCWR) means the value specified by
the vehicle manufacturer as the maximum weight of a loaded vehicle and
trailer, consistent with good engineering judgment.
* * * * *
Gross vehicle weight rating (GVWR) means the value specified by the
manufacturer as the maximum design loaded weight of a single vehicle,
consistent with good engineering judgment.
* * * * *
Platform means a group of vehicles with common body floor plan and
construction, chassis construction and components, basic engine, and
transmission class. Platform does not consider any level of
d[eacute]cor or opulence, or characteristics such as roof line, number
of doors, seats, or windows. A single platform may include multiple
fuel economy label classes or car lines, and may include both cars and
trucks.
* * * * *
12. Section 86.1818-12 is amended as follows:
a. By adding paragraph (b)(4).
b. By revising paragraphs (c)(2)(i)(A) through (C).
c. By revising paragraphs (c)(3)(i)(A) through (C).
d. By adding paragraph (c)(3)(i)(D).
e. By adding paragraph (c)(4).
f. By revising paragraph (f) introductory text.
g. By revising paragraph (f)(3).
h. By adding paragraph (g).
i. By adding paragraph (h).
The additions and revisions read as follows:
[[Page 75362]]
Sec. 86.1818-12 Greenhouse gas emission standards for light-duty
vehicles, light-duty trucks, and medium-duty passenger vehicles.
* * * * *
(b) * * *
(4) Emergency vehicle means a motor vehicle manufactured primarily
for use as an ambulance or combination ambulance-hearse or for use by
the United States Government or a State or local government for law
enforcement.
(c) * * *
(2) * * *
(i) * * *
(A) For passenger automobiles with a footprint of less than or
equal to 41 square feet, the gram/mile CO2 target value
shall be selected for the appropriate model year from the following
table:
[GRAPHIC] [TIFF OMITTED] TP01DE11.700
[[Page 75363]]
(B) For passenger automobiles with a footprint of greater than 56
square feet, the gram/mile CO2 target value shall be
selected for the appropriate model year from the following table:
[GRAPHIC] [TIFF OMITTED] TP01DE11.701
BILLING CODE 4910-59-C
(C) For passenger automobiles with a footprint that is greater than
41 square feet and less than or equal to 56 square feet, the gram/mile
CO2 target value shall be calculated using the following
equation and rounded to the nearest 0.1 grams/mile:
Target CO2 = [a x f ] + b
Where:
f is the vehicle footprint, as defined in Sec. 86.1803; and
a and b are selected from the following table for the appropriate
model year:
[[Page 75364]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.704
* * * * *
(3) * * *
(i) * * *
(A) For light trucks with a footprint of less than or equal to 41
square feet, the gram/mile CO2 target value shall be
selected for the appropriate model year from the following table:
[[Page 75365]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.705
(B) For light trucks with a footprint that is greater than 41
square feet and less than or equal to the maximum footprint value
specified in the table below for each model year, the gram/mile
CO2 target value shall be calculated using the following
equation and rounded to the nearest 0.1 grams/mile:
Target CO2 = (a x f) + b
Where:
f is the footprint, as defined in Sec. 86.1803; and
a and b are selected from the following table for the appropriate
model year:
[[Page 75366]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.706
(C) For light trucks with a footprint that is greater than the
minimum footprint value specified in the table below and less than or
equal to the maximum footprint value specified in the table below for
each model year, the gram/mile CO2 target value shall be
calculated using the following equation and rounded to the nearest 0.1
grams/mile:
Target CO2 = (a x f) + b
Where:
f is the footprint, as defined in Sec. 86.1803; and
a and b are selected from the following table for the appropriate
model year:
[[Page 75367]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.708
(D) For light trucks with a footprint greater than the minimum
value specified in the table below for each model year, the gram/mile
CO2 target value shall be selected for the appropriate model
year from the following table:
[[Page 75368]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.709
* * * * *
(4) Emergency vehicles. Emergency vehicles may be excluded from the
fleet average CO2 exhaust emission standards described in
paragraph (c) of this section. The manufacturer should notify the
Administrator that they are making such an election in the model year
reports required under Sec. 600.512 of this chapter. Such vehicles
should be excluded from both the calculation of the fleet average
standard for a manufacturer under this paragraph (c) and from the
calculation of the fleet average carbon-related exhaust emissions in
86.510-12.
* * * * *
(f) Nitrous oxide (N2O) and methane (CH4)
exhaust emission standards for passenger automobiles and light trucks.
Each manufacturer's fleet of combined passenger automobile and light
trucks must comply with N2O and CH4 standards
using either the provisions of paragraph (f)(1), (2), or (3) of this
section. Except with prior EPA approval, a manufacturer may not use the
provisions of both paragraphs (f)(1) and (2) of this section in a model
year. For example, a manufacturer may not use the provisions of
paragraph (f)(1) of this section for their passenger automobile fleet
and the provisions of
[[Page 75369]]
paragraph (f)(2) for their light truck fleet in the same model year.
The manufacturer may use the provisions of both paragraphs (f)(1) and
(3) of this section in a model year. For example, a manufacturer may
meet the N2O standard in paragraph (f)(1)(i) of this section
and an alternative CH4 standard determined under paragraph
(f)(3) of this section.
* * * * *
(3) Optional use of alternative N2O and/or
CH4 standards. Manufacturers may select an alternative
standard applicable to a test group, for either N2O or
CH4, or both. For example, a manufacturer may choose to meet
the N2O standard in paragraph (f)(1)(i) of this section and
an alternative CH4 standard in lieu of the standard in
paragraph (f)(1)(ii) of this section. The alternative standard for each
pollutant must be greater than the applicable exhaust emission standard
specified in paragraph (f)(1) of this section. Alternative
N2O and CH4 standards apply to emissions measured
according to the Federal Test Procedure (FTP) described in Subpart B of
this part for the full useful life, and become the applicable
certification and in-use emission standard(s) for the test group.
Manufacturers using an alternative standard for N2O and/or
CH4 must calculate emission debits according to the
provisions of paragraph (f)(4) of this section for each test group/
alternative standard combination. Debits must be included in the
calculation of total credits or debits generated in a model year as
required under Sec. 86.1865-12(k)(5). For flexible fuel vehicles (or
other vehicles certified for multiple fuels) you must meet these
alternative standards when tested on any applicable test fuel type.
* * * * *
(g) Alternative fleet average standards for manufacturers with
limited U.S. sales. Manufacturers meeting the criteria in this
paragraph (g) may request that the Administrator establish alternative
fleet average CO2 standards that would apply instead of the
standards in paragraph (c) of this section. The provisions of this
paragraph (g) are applicable only to the 2017 and later model years.
(1) Eligibility for alternative standards. Eligibility as
determined in this paragraph (g) shall be based on the total sales of
combined passenger automobiles and light trucks. The terms ``sales''
and ``sold'' as used in this paragraph (g) shall mean vehicles produced
and delivered for sale (or sold) in the states and territories of the
United States. For the purpose of determining eligibility the sales of
related companies shall be aggregated according to the provisions of
Sec. 86.1838-01(b)(3). To be eligible for alternative standards
established under this paragraph (g), the manufacturer's average sales
for the three most recent consecutive model years must remain below
5,000. If a manufacturer's average sales for the three most recent
consecutive model years exceeds 4,999, the manufacturer will no longer
be eligible for exemption and must meet applicable emission standards
starting with the model year according to the provisions in this
paragraph (g)(1).
(i) If a manufacturer's average sales for three consecutive model
years exceeds 4,999, and if the increase in sales is the result of
corporate acquisitions, mergers, or purchase by another manufacturer,
the manufacturer shall comply with the emission standards described in
Sec. 86.1818-12(c) and (d), as applicable, beginning with the first
model year after the last year of the three consecutive model years.
(ii) If a manufacturer's average sales for three consecutive model
years exceeds 4,999 and is less than 50,000, and if the increase in
sales is solely the result of the manufacturer's expansion in vehicle
production (not the result of corporate acquisitions, mergers, or
purchase by another manufacturer), the manufacturer shall comply with
the emission standards described in Sec. 86.1818-12(c) through (e), as
applicable, beginning with the second model year after the last year of
the three consecutive model years.
(2) Requirements for new entrants into the U.S. market. New
entrants are those manufacturers without a prior record of automobile
sales in the United States and without prior certification to (or
exemption from, under Sec. 86.1801-12(k)) greenhouse gas emission
standards in Sec. 86.1818-12. In addition to the eligibility
requirements stated in paragraph (g)(1) of this section, new entrants
must meet the following requirements:
(i) In addition to the information required under paragraph (g)(4)
of this section, new entrants must provide documentation that shows a
clear intent by the company to actually enter the U.S. market in the
years for which alternative standards are requested. Demonstrating such
intent could include providing documentation that shows the
establishment of a U.S. dealer network, documentation of work underway
to meet other U.S. requirements (e.g., safety standards), or other
information that reasonably establishes intent to the satisfaction of
the Administrator.
(ii) Sales of vehicles in the U.S. by new entrants must remain
below 5,000 vehicles for the first two model years in the U.S. market
and the average sales for any three consecutive years within the first
five years of entering the U.S. market must remain below 5,000
vehicles. Vehicles sold in violation of these limits will be considered
not covered by the certificate of conformity and the manufacturer will
be subject to penalties on an individual-vehicle basis for sale of
vehicles not covered by a certificate. In addition, violation of these
limits will result in loss of eligibility for alternative standards
until such point as the manufacturer demonstrates two consecutive model
years of sales below 5,000 automobiles.
(iii) A manufacturer with sales in the most recent model year of
less than 5,000 automobiles, but where prior model year sales were not
less than 5,000 automobiles, is eligible to request alternative
standards under this paragraph (g). However, such a manufacturer will
be considered a new entrant and subject to the provisions regarding new
entrants in this paragraph (g), except that the requirement to
demonstrate an intent to enter the U.S. market it paragraph (g)(2)(i)
of this section shall not apply.
(3) How to request alternative fleet average standards. Eligible
manufacturers may petition for alternative standards for up to five
consecutive model years if sufficient information is available on which
to base such standards.
(i) To request alternative standards starting with the 2017 model
year, eligible manufacturers must submit a completed application no
later than July 30, 2013.
(ii) To request alternative standards starting with a model after
2017, eligible manufacturers must submit a completed request no later
than 36 months prior to the start of the first model year to which the
alternative standards would apply.
(iii) The request must contain all the information required in
paragraph (g)(4) of this section, and must be signed by a chief officer
of the company. If the Administrator determines that the content of the
request is incomplete or insufficient, the manufacturer will be
notified and given an additional 30 days to amend the request.
(4) Data and information submittal requirements. Eligible
manufacturers requesting alternative standards under this paragraph (g)
must submit the following information to the Environmental Protection
Agency. The Administrator may request additional information as she
deems appropriate. The completed request must be sent to
[[Page 75370]]
the Environmental Protection Agency at the following address: Director,
Compliance and Innovative Strategies Division, U.S. Environmental
Protection Agency, 2000 Traverwood Drive, Ann Arbor, Michigan 48105.
(i) Vehicle model and fleet information. (A) The model years to
which the requested alternative standards would apply, limited to five
consecutive model years.
(B) Vehicle models and projections of production volumes for each
model year.
(C) Detailed description of each model, including the vehicle type,
vehicle mass, power, footprint, and expected pricing.
(D) The expected production cycle for each model, including new
model introductions and redesign or refresh cycles.
(ii) Technology evaluation information. (A) The CO2
reduction technologies employed by the manufacturer on each vehicle
model, including information regarding the cost and CO2-
reducing effectiveness. Include technologies that improve air
conditioning efficiency and reduce air conditioning system leakage, and
any ``off-cycle'' technologies that potentially provide benefits
outside the operation represented by the Federal Test Procedure and the
Highway Fuel Economy Test.
(B) An evaluation of comparable models from other manufacturers,
including CO2 results and air conditioning credits generated
by the models. Comparable vehicles should be similar, but not
necessarily identical, in the following respects: vehicle type,
horsepower, mass, power-to-weight ratio, footprint, retail price, and
any other relevant factors. For manufacturers requesting alternative
standards starting with the 2017 model year, the analysis of comparable
vehicles should include vehicles from the 2012 and 2013 model years,
otherwise the analysis should at a minimum include vehicles from the
most recent two model years.
(C) A discussion of the CO2-reducing technologies
employed on vehicles offered outside of the U.S. market but not
available in the U.S., including a discussion as to why those vehicles
and/or technologies are not being used to achieve CO2
reductions for vehicles in the U.S. market.
(D) An evaluation, at a minimum, of the technologies projected by
the Environmental Protection Agency in a final rulemaking as those
technologies likely to be used to meet greenhouse gas emission
standards and the extent to which those technologies are employed or
projected to be employed by the manufacturer. For any technology that
is not projected to be fully employed, explain why this is the case.
(iii) Alternative fleet average CO2 standards. (A) The
most stringent CO2 level estimated to be feasible for each
model, in each model year, and the technological basis for this
estimate.
(B) For each model year, a projection of the lowest feasible sales-
weighted fleet average CO2 value, separately for passenger
automobiles and light trucks, and an explanation demonstrating that
these projections are reasonable.
(C) A copy of any application, data, and related information
submitted to NHTSA in support of a request for alternative Corporate
Average Fuel Economy standards filed under 49 CFR Part 525.
(iv) Information supporting eligibility. (A) U.S. sales for the
three previous model years and projected sales for the model years for
which the manufacturer is seeking alternative standards.
(B) Information regarding ownership relationships with other
manufacturers, including details regarding the application of the
provisions of Sec. 86.1838-01(b)(3) regarding the aggregation of sales
of related companies,
(5) Alternative standards. Upon receiving a complete application,
the Administrator will review the application and determine whether an
alternative standard is warranted. If the Administrator judges that an
alternative standard is warranted, the Administrator will publish a
proposed determination in the Federal Register to establish alternative
standards for the manufacturer that the Administrator judges are
appropriate. Following a 30 day public comment period, the
Administrator will issue a final determination establishing alternative
standards for the manufacturer. If the Administrator does not establish
alternative standards for an eligible manufacturer prior to 12 months
before the first model year to which the alternative standards would
apply, the manufacturer may request an extension of the exemption under
86.1801-12(k) or an extension of previously approved alternative
standards, whichever may apply.
(6) Restrictions on credit trading. Manufacturers subject to
alternative standards approved by the Administrator under this
paragraph (g) may not trade credits to another manufacturer. Transfers
between car and truck fleets within the manufacturer are allowed.
(h) Mid-term evaluation of standards. No later than April 1, 2018,
the Administrator shall determine whether the standards established in
paragraph (c) of this section for the 2022 through 2025 model years are
appropriate under section 202(a) of the Clean Air Act, in light of the
record then before the Administrator. An opportunity for public comment
shall be provided before making such determination. If the
Administrator determines they are not appropriate, the Administrator
shall initiate a rulemaking to revise the standards, to be either more
or less stringent as appropriate.
(1) In making the determination required by this paragragh (h), the
Administrator shall consider the information available on the factors
relevant to setting greenhouse gas emission standards under section
202(a) of the Clean Air Act for model years 2022 through 2025,
including but not limited to:
(i) The availability and effectiveness of technology, and the
appropriate lead time for introduction of technology;
(ii) The cost on the producers or purchasers of new motor vehicles
or new motor vehicle engines;
(iii) The feasibility and practicability of the standards;
(iv) The impact of the standards on reduction of emissions, oil
conservation, energy security, and fuel savings by consumers;
(v) The impact of the standards on the automobile industry;
(vi) The impacts of the standards on automobile safety;
(vii) The impact of the greenhouse gas emission standards on the
Corporate Average Fuel Economy standards and a national harmonized
program; and
(viii) The impact of the standards on other relevant factors.
(2) The Administrator shall make the determination required by this
paragraph (h) based upon a record that includes the following:
(i) A draft Technical Assessment Report addressing issues relevant
to the standard for the 2022 through 2025 model years;
(ii) Public comment on the draft Technical Assessment Report;
(iii) Public comment on whether the standards established for the
2022 through 2025 model years are appropriate under section 202(a) of
the Clean Air Act; and
(iv) Such other materials the Administrator deems appropriate.
(3) No later than November 15, 2017, the Administrator shall issue
a draft Technical Assessment Report addressing issues relevant to the
standards for the 2022 through 2025 model years.
(4) The Administrator will set forth in detail the bases for the
determination
[[Page 75371]]
required by this paragraph (h), including the Administrator's
assessment of each of the factors listed in paragraph (h)(1) of this
section.
13. Section 86.1823-08 is amended by revising paragraph (m)(2)(iii)
to read as follows:
Sec. 86.1823-08 Durability demonstration procedures for exhaust
emissions.
* * * * *
(m) * * *
(2) * * *
(iii) For the 2012 through 2016 model years only, manufacturers may
use alternative deterioration factors. For N2O, the
alternative deterioration factor to be used to adjust FTP and HFET
emissions is the deterioration factor determined for (or derived from,
using good engineering judgment) NOX emissions according to
the provisions of this section. For CH4, the alternative
deterioration factor to be used to adjust FTP and HFET emissions is the
deterioration factor determined for (or derived from, using good
engineering judgment) NMOG or NMHC emissions according to the
provisions of this section.
* * * * *
14. Section 86.1829-01 is amended by revising paragraph (b)(1)(iii)
to read as follows:
Sec. 86.1829-01 Durability and emission testing requirements;
waivers.
* * * * *
(b) * * *
(1) * * *
(iii) Data submittal waivers. (A) In lieu of testing a methanol-
fueled diesel-cycle light truck for particulate emissions a
manufacturer may provide a statement in its application for
certification that such light trucks comply with the applicable
standards. Such a statement shall be based on previous emission tests,
development tests, or other appropriate information and good
engineering judgment.
(B) In lieu of testing an Otto-cycle light-duty vehicle, light-duty
truck, or heavy-duty vehicle for particulate emissions for
certification, a manufacturer may provide a statement in its
application for certification that such vehicles comply with the
applicable standards. Such a statement must be based on previous
emission tests, development tests, or other appropriate information and
good engineering judgment.
(C) A manufacturer may petition the Administrator for a waiver of
the requirement to submit total hydrocarbon emission data. If the
waiver is granted, then in lieu of testing a certification light-duty
vehicle or light-duty truck for total hydrocarbon emissions the
manufacturer may provide a statement in its application for
certification that such vehicles comply with the applicable standards.
Such a statement shall be based on previous emission tests, development
tests, or other appropriate information and good engineering judgment.
(D) A manufacturer may petition the Administrator to waive the
requirement to measure particulate emissions when conducting Selective
Enforcement Audit testing of Otto-cycle vehicles.
(E) In lieu of testing a gasoline, diesel, natural gas, liquefied
petroleum gas, or hydrogen fueled Tier 2 or interim non-Tier 2 vehicle
for formaldehyde emissions when such vehicles are certified based upon
NMHC emissions, a manufacturer may provide a statement in its
application for certification that such vehicles comply with the
applicable standards. Such a statement must be based on previous
emission tests, development tests, or other appropriate information and
good engineering judgment.
(F) In lieu of testing a petroleum-, natural gas-, liquefied
petroleum gas-, or hydrogen-fueled heavy-duty vehicle for formaldehyde
emissions for certification, a manufacturer may provide a statement in
its application for certification that such vehicles comply with the
applicable standards. Such a statement must be based on previous
emission tests, development tests, or other appropriate information and
good engineering judgment.
(G) For the 2012 through 2016 model years only, in lieu of testing
a vehicle for N2O emissions, a manufacturer may provide a
statement in its application for certification that such vehicles
comply with the applicable standards. Such a statement must be based on
previous emission tests, development tests, or other appropriate
information and good engineering judgment.
* * * * *
15. Section 86.1865-12 is amended as follows:
a. By revising paragraph (k)(5) introductory text.
b. By redesignating paragraph (k)(5)(iv) as paragraph (k)(5)(v).
c. By adding new paragraph (k)(5)(iv).
d. By revising paragraph (k)(6).
e. By revising paragraph (k)(7)(i).
f. By revising paragraph (k)(8)(iv)(A).
g. By revising paragraph (l)(1)(ii) introductory text.
h. By revising paragraph (l)(1)(ii)(F).
The revisions read as follows:
Sec. 86.1865-12 How to comply with the fleet average CO2
standards.
* * * * *
(k) * * *
(5) Total credits or debits generated in a model year, maintained
and reported separately for passenger automobiles and light trucks,
shall be the sum of the credits or debits calculated in paragraph
(k)(4) of this section and any of the following credits, if applicable,
minus any N2O and/or CH4 CO2-
equivalent debits calculated according to the provisions of Sec.
86.1818-12(f)(4):
* * * * *
(iv) Full size pickup truck credits earned according to the
provisions of Sec. 86.1866-12(e).
(6) The expiration date of unused CO2 credits is based
on the model year in which the credits are earned, as follows:
(i) Unused CO2 credits from the 2009 model year shall
retain their full value through the 2014 model year. Credits remaining
at the end of the 2014 model year shall expire.
(ii) Unused CO2 credits from the 2010 through 2015 model
years shall retain their full value through the 2021 model year.
Credits remaining at the end of the 2021 model year shall expire.
(iii) Unused CO2 credits from the 2016 and later model
years shall retain their full value through the five subsequent model
years after the model year in which they were generated. Credits
remaining at the end of the fifth model year after the model year in
which they were generated shall expire.
(7) * * *
(i) Credits generated and calculated according to the method in
paragraphs (k)(4) and (5) of this section may not be used to offset
deficits other than those deficits accrued with respect to the standard
in Sec. 86.1818. Credits may be banked and used in a future model year
in which a manufacturer's average CO2 level exceeds the
applicable standard. Credits may be transferred between the passenger
automobile and light truck fleets of a given manufacturer. Credits may
also be traded to another manufacturer according to the provisions in
paragraph (k)(8) of this section. Before trading or carrying over
credits to the next model year, a manufacturer must apply available
credits to offset any deficit, where the deadline to offset that credit
deficit has not yet passed.
* * * * *
(8) * * *
(iv) * * *
(A) If a manufacturer ceases production of passenger automobiles
and light trucks, the manufacturer continues to be responsible for
offsetting any debits outstanding within the required time period. Any
failure to offset the debits will be considered a
[[Page 75372]]
violation of paragraph (k)(8)(i) of this section and may subject the
manufacturer to an enforcement action for sale of vehicles not covered
by a certificate, pursuant to paragraphs (k)(8)(ii) and (iii) of this
section.
* * * * *
(l) * * *
(1) * * *
(ii) Manufacturers producing any passenger automobiles or light
trucks subject to the provisions in this subpart must establish,
maintain, and retain all the following information in adequately
organized records for each passenger automobile or light truck subject
to this subpart:
* * * * *
(F) Carbon-related exhaust emission standard, N2O
emission standard, and CH4 emission standard to which the
passenger automobile or light truck is certified.
* * * * *
16. Section 86.1866-12 is amended as follows:
a. By revising the heading,
b. By revising paragraphs (a) and (b).
c. By revising paragraph (c) introductory text.
d. By revising paragraphs (c)(1) through (3).
e. By revising paragraph (c)(5) introductory text.
f. By revising paragraph (c)(5)(i).
g. By revising paragraph (c)(5)(iii) introductory text.
h. By redesignating paragraph (c)(5)(iv) and paragraph (c)(5)(v).
i. By adding new paragraph (c)(5)(iv).
j. By redesignating paragraph (c)(6) as (c)(8).
k. By adding paragraphs (c)(6) and (7).
l. By revising paragraph (d).
m. By adding paragraph (e).
The revisions and additions read as follows:
Sec. 86.1866-12 CO2 fleet average credit and incentive
programs.
(a) Advanced technology vehicles. (1) Electric vehicles, plug-in
hybrid electric vehicles, and fuel cell vehicles, as those terms are
defined in Sec. 86.1803-01, that are certified and produced and
delivered for sale in the United States in the 2012 through 2025 model
years may use a value of zero (0) grams/mile of CO2 to
represent the proportion of electric operation of a vehicle that is
derived from electricity that is generated from sources that are not
onboard the vehicle.
(i) Model years 2012 through 2016: The use of zero (0) grams/mile
CO2 is limited to the first 200,000 combined electric
vehicles, plug-in hybrid electric vehicles, and fuel cell vehicles
produced and delivered for sale by a manufacturer in the 2012 through
2016 model years, except that a manufacturer that produces and delivers
for sale 25,000 or more such vehicles in the 2012 model year shall be
subject to a limitation on the use of zero (0) grams/mile
CO2 to the first 300,000 combined electric vehicles, plug-in
hybrid electric vehicles, and fuel cell vehicles produced and delivered
for sale by a manufacturer in the 2012 through 2016 model years.
(ii) Model years 2017 through 2021: For electric vehicles, plug-in
hybrid electric vehicles, and fuel cell vehicles produced and delivered
for sale in the 2017 through 2021 model years, such use of zero (0)
grams/mile CO2 is unrestricted.
(iii) Model years 2022 through 2025: The use of zero (0) grams/mile
CO2 is limited to the first 200,000 combined electric
vehicles, plug-in hybrid electric vehicles, and fuel cell vehicles
produced and delivered for sale by a manufacturer in the 2022 through
2025 model years, except that a manufacturer that produces and delivers
for sale 300,000 or more such vehicles in the 2019 through 2021 model
years shall be subject to a limitation on the use of zero (0) grams/
mile CO2 to the first 600,000 combined electric vehicles,
plug-in hybrid electric vehicles, and fuel cell vehicles produced and
delivered for sale by a manufacturer in the 2022 through 2025 model
years.
(2) For electric vehicles, plug-in hybrid electric vehicles, and
fuel cell vehicles, as those terms are defined in Sec. 86.1803-01,
that are certified and produced and delivered for sale in the United
States in the 2017 through 2021 model years and that meet the
additional specifications in this section, the manufacturer may use the
production multipliers in this paragraph (a)(2) when determining the
manufacturer's fleet average carbon-related exhaust emissions under
Sec. 600.512 of this chapter. Full size pickup trucks eligible for and
using a production multiplier are not eligible for the performance-
based credits described in paragraph (e)(3) of this section.
(i) The production multipliers, by model year, for electric
vehicles and fuel cell vehicles, are as follows:
[GRAPHIC] [TIFF OMITTED] TP01DE11.710
(ii) (A) The production multipliers, by model year, for plug-in
hybrid electric vehicles, are as follows:
[[Page 75373]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.711
(B) The minimum all-electric driving range that a plug-in hybrid
electric vehicle must have in order to qualify for use of a production
multiplier is 10.2 miles on its nominal storage capacity of electricity
when operated on the highway fuel economy test cycle. Alternatively, a
plug-in hybrid electric vehicle may qualify for use of a production
multiplier by having an equivalent all-electric driving range greater
than or equal to 10.2 miles during its actual charge-depleting range as
measured on the highway fuel economy test cycle and tested according to
the requirements of SAE J1711, Recommended Practice for Measuring the
Exhaust Emissions and Fuel Economy of Hybrid-Electric Vehicles,
Including Plug-In Hybrid Vehicles (incorporated by reference, see Sec.
86.1). The equivalent all-electric range of a PHEV is determined from
the following formula:
[GRAPHIC] [TIFF OMITTED] TP01DE11.712
Where:
EAER = the equivalent all-electric range attributed to charge-
depleting operation of a plug-in hybrid electric vehicle on the
highway fuel economy test cycle.
RCDA = The actual charge-depleting range determined
according to SAE J1711, Recommended Practice for Measuring the
Exhaust Emissions and Fuel Economy of Hybrid-Electric Vehicles,
Including Plug-In Hybrid Vehicles (incorporated by reference, see
Sec. 86.1).
CO2CS = The charge-sustaining CO2 emissions in
grams per mile on the highway fuel economy test determined according
to SAE J1711, Recommended Practice for Measuring the Exhaust
Emissions and Fuel Economy of Hybrid-Electric Vehicles, Including
Plug-In Hybrid Vehicles (incorporated by reference, see Sec. 86.1).
CO2CD = The charge-depleting CO2 emissions in
grams per mile on the highway fuel economy test determined according
to SAE J1711, Recommended Practice for Measuring the Exhaust
Emissions and Fuel Economy of Hybrid-Electric Vehicles, Including
Plug-In Hybrid Vehicles (incorporated by reference, see Sec. 86.1).
(iii) The actual production of qualifying vehicles may be
multiplied by the applicable value according to the model year, and the
result, rounded to the nearest whole number, may be used to represent
the production of qualifying vehicles when calculating average carbon-
related exhaust emissions under Sec. 600.512 of this chapter.
(b) Credits for reduction of air conditioning refrigerant leakage.
Manufacturers may generate credits applicable to the CO2
fleet average program described in Sec. 86.1865-12 by implementing
specific air conditioning system technologies designed to reduce air
conditioning refrigerant leakage over the useful life of their
passenger automobiles and/or light trucks. Credits shall be calculated
according to this paragraph (b) for each air conditioning system that
the manufacturer is using to generate CO2 credits.
Manufacturers may also generate early air conditioning refrigerant
leakage credits under this paragraph (b) for the 2009 through 2011
model years according to the provisions of Sec. 86.1867-12(b).
(1) The manufacturer shall calculate an annual rate of refrigerant
leakage from an air conditioning system in grams per year according to
the provisions of Sec. 86.166-12.
(2) The CO2-equivalent gram per mile leakage reduction
to be used to calculate the total leakage credits generated by the air
conditioning system shall be determined according to the following
formulae, rounded to the nearest tenth of a gram per mile:
(i) Passenger automobiles:
[GRAPHIC] [TIFF OMITTED] TP01DE11.713
Where:
HiLeakDis means the high leak disincentive, which is zero for model
years 2012 through 2016, and for 2017 and later model years is
determined using the following equation, except that if
GWPREF is greater than 150 or if the result is less than
zero HiLeakDis shall be set equal to zero and if the result is
greater than 1.8 g/mi HiLeakDis shall be set to 1.8 g/mi:
[[Page 75374]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.714
MaxCredit is 12.6 (grams CO2-equivalent/mile) for air
conditioning systems using HFC-134a, and 13.8 (grams CO2-
equivalent/mile) for air conditioning systems using a refrigerant
with a lower global warming potential.
LeakScore means the annual refrigerant leakage rate determined
according to the provisions of Sec. 86.166-12(a), except if the
calculated rate is less than 8.3 grams/year (4.1 grams/year for
systems using only electric compressors), the rate for the purpose
of this formula shall be 8.3 grams/year (4.1 grams/year for systems
using only electric compressors).
The constant 16.6 is the average passenger automobile impact of air
conditioning leakage in units of grams/year;
GWPREF means the global warming potential of the
refrigerant as indicated in paragraph (b)(5) of this section or as
otherwise determined by the Administrator;
GWPHFC134a means the global warming potential of HFC-134a
as indicated in paragraph (b)(5) of this section or as otherwise
determined by the Administrator.
MinScore is 8.3 grams/year, except that for systems using only
electric compressors it is 4.1 grams/year.
(ii) Light trucks:
[GRAPHIC] [TIFF OMITTED] TP01DE11.715
Where:
HiLeakDis means the high leak disincentive, which is zero for model
years 2012 through 2016, and for 2017 and later model years is
determined using the following equation, except that if
GWPREF is greater than 150 or if the result is less than
zero HiLeakDis shall be set equal to zero and if the result is
greater than 2.1 g/mi HiLeakDis shall be set to 2.1g/mi:
[GRAPHIC] [TIFF OMITTED] TP01DE11.716
MaxCredit is 15.6 (grams CO2-equivalent/mile) for air
conditioning systems using HFC-134a, and 17.2 (grams CO2-
equivalent/mile) for air conditioning systems using a refrigerant
with a lower global warming potential.
Leakage means the annual refrigerant leakage rate determined
according to the provisions of Sec. 86.166-12(a), except if the
calculated rate is less than 10.4 grams/year (5.2 grams/year for
systems using only electric compressors), the rate for the purpose
of this formula shall be 10.4 grams/year (5.2 grams/year for systems
using only electric compressors).
The constant 20.7 is the average light truck impact of air
conditioning leakage in units of grams/year.
GWPREF means the global warming potential of the
refrigerant as indicated in paragraph (b)(5) of this section or as
otherwise determined by the Administrator.
GWPR134a means the global warming potential of HFC-134a
as indicated in paragraph (b)(5) of this section or as otherwise
determined by the Administrator.
MinScore is 10.4 grams/year, except that for systems using only
electric compressors it is 5.2 grams/year.
(3) The total leakage reduction credits generated by the air
conditioning system shall be calculated separately for passenger
automobiles and light trucks according to the following formula:
Total Credits (megagrams) = (Leakage x Production x VLM) / 1,000,000
Where:
Leakage = the CO2-equivalent leakage credit value in
grams per mile determined in paragraph (b)(2) of this section.
Production = The total number of passenger automobiles or light
trucks, whichever is applicable, produced with the air conditioning
system to which to the leakage credit value from paragraph (b)(2) of
this section applies.
VLM = vehicle lifetime miles, which for passenger automobiles shall
be 195,264 and for light trucks shall be 225,865.
(4) The results of paragraph (b)(3) of this section, rounded to the
nearest whole number, shall be included in the manufacturer's credit/
debit totals calculated in Sec. 86.1865-12(k)(5).
(5) The following values for refrigerant global warming potential
(GWPREF), or alternative values as determined by the
Administrator, shall be used in the calculations of this paragraph (b).
The Administrator will determine values for refrigerants not included
in this paragraph (b)(5) upon request by a manufacturer.
(i) For HFC-134a, GWPREF = 1430;
(ii) For HFC-152a, GWPREF = 124;
(iii) For HFO-1234yf, GWPREF = 4;
(iv) For CO2, GWPREF = 1.
(c) Credits for improving air conditioning system efficiency.
Manufacturers may generate credits applicable to the CO2
fleet average program described in Sec. 86.1865-12 by implementing
specific air conditioning system technologies designed to reduce air
conditioning-related CO2 emissions over the useful life of
their passenger automobiles and/or light trucks. Credits shall be
calculated according to this paragraph (c) for each air conditioning
system that the manufacturer is using to generate CO2
credits. Manufacturers may also generate early air conditioning
efficiency credits under this paragraph (c) for the 2009 through 2011
model years according to the provisions of Sec. 86.1867-12(b). For
model years 2012 and 2013 the manufacturer may determine air
conditioning efficiency credits using the requirements in paragraphs
(c)(1) through (4) of this section. For model years 2014 and later the
eligibility requirements specified in either paragraph (c)(5) or (6) of
this section must be met before an air conditioning system is allowed
to generate credits.
(1)(i) 2012 through 2016 model year air conditioning efficiency
credits are available for the following technologies in the gram per
mile amounts indicated in the following table:
BILLING CODE 4910-59-P
[[Page 75375]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.717
[[Page 75376]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.718
BILLING CODE 4910-59-C
(i) 2017 and later model year air conditioning efficiency credits
are available for the following technologies in the gram per mile
amounts indicated for each vehicle category in the following table:
BILLING CODE 4910-59-P
[[Page 75377]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.719
[[Page 75378]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.720
[[Page 75379]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.721
BILLING CODE 4910-59-C
(2) Air conditioning efficiency credits are determined on an air
conditioning system basis. For each air conditioning system that is
eligible for a credit based on the use of one or more of the items
listed in paragraph (c)(1) of this section, the total credit value is
the sum of the gram per mile values listed in paragraph (c)(1) of this
section for each item that applies to the air conditioning system.
(i) In the 2012 through 2016 model years the total credit value for
an air conditioning system may not be greater than 5.7 grams per mile.
(ii) In the 2017 and later model years the total credit value for
an air conditioning system may not be greater than 5.0 grams per mile
for any passenger automobile or 7.2 grams per mile for any light truck.
(3) The total efficiency credits generated by an air conditioning
system shall be calculated separately for passenger automobiles and
light trucks according to the following formula:
Total Credits (Megagrams) = (Credit x Production x VLM) / 1,000,000
Where:
Credit = the CO2 efficiency credit value in grams per
mile determined in paragraph (c)(2) or (c)(5) of this section,
whichever is applicable.
Production = The total number of passenger automobiles or light
trucks, whichever is applicable, produced with the air conditioning
system to which to the efficiency credit value from paragraph (c)(2)
of this section applies.
VLM = vehicle lifetime miles, which for passenger automobiles shall
be 195,264 and for light trucks shall be 225,865.
* * * * *
(5) For the 2014 through 2016 model years, manufacturers must
validate air conditioning credits by using the Air Conditioning Idle
Test Procedure according to the provisions of this paragraph (c)(5). In
lieu of using the Air Conditioning Idle Test Procedure to determine
eligibility to generate air conditioning efficiency credits in the 2014
through 2016 model years, the manufacturer may choose the AC17
reporting option specified in paragraph (c)(7) of this section.
(i) After the 2013 model year, for each air conditioning system
selected by the manufacturer to generate air conditioning efficiency
credits, the manufacturer shall perform the Air Conditioning Idle Test
Procedure specified in Sec. 86.165-12 of this part.
* * * * *
(iii) For an air conditioning system to be eligible to generate
credits in the 2014 through 2016 model years the increased
CO2 emissions as a result of the operation of that air
conditioning system determined according to the Idle Test Procedure in
Sec. 86.165-14 must be less than 21.3 grams per minute. In lieu of
using 21.3 grams per minute, manufacturers may optionally use the
procedures in paragraph (c)(5)(iv) of this section to determine an
alternative limit value.
* * * * *
(iv) Optional Air Conditioning Idle Test limit value for 2014
through 2016 model years. For an air conditioning system to be eligible
to generate credits in the 2014 through 2016 model years, the increased
CO2 emissions as a result of the operation of that air
conditioning system determined according to the Idle Test Procedure in
Sec. 86.165-12 must be less than the value calculated by the following
equation and rounded to the nearest tenth of gram per minute:
[GRAPHIC] [TIFF OMITTED] TP01DE11.722
(A) If the increased CO2 emissions determined from the
Idle Test Procedure in Sec. 86.165-12 is less than or equal to the
Idle Test Threshold, the total credit value for use in paragraph (c)(3)
of this section shall be as determined in paragraph (c)(2) of this
section.
(B) If the increased CO2 emissions determined from the
Idle Test Procedure in Sec. 86.165-12 is greater than the Idle Test
Threshold and less than the Idle Test Threshold plus 6.4, the total
credit value for use in paragraph (c)(3) of this section shall be as
determined according to the following formula:
[GRAPHIC] [TIFF OMITTED] TP01DE11.723
Where:
TCV = The total credit value for use in paragraph (c)(3) of this
section;
TCV1 = The total credit value determined according to
paragraph (c)(2) of this section; and
[[Page 75380]]
ITP = the increased CO2 emissions determined from the
Idle Test Procedure in Sec. 86.165-14.
ITT = the Idle Test Threshold from paragraph (c)(5)(iii) or
(c)(5)(iv) of this section, whichever is applicable.
(6) For the 2017 and later model years, manufacturers must validate
air conditioning credits by using the AC17 Test Procedure according to
the provisions of this paragraph (c)(6).
(i) For each air conditioning system selected by the manufacturer
to generate air conditioning efficiency credits, the manufacturer shall
perform the AC17 Air Conditioning Efficiency Test Procedure specified
in Sec. 86.167-14 of this part, according to the requirements of this
paragraph (c)(6).
(ii) Each air conditioning system shall be tested as follows:
(A) Perform the AC17 test on a vehicle that incorporates the air
conditioning system with the credit-generating technologies.
(B) Perform the AC17 test on a vehicle which does not incorporate
the credit-generating technologies. The tested vehicle must be similar
to the vehicle tested under paragraph (c)(6)(ii)(A) of this section.
(C) Subtract the CO2 emissions determined from testing
under paragraph (c)(6)(ii)(A) of this section from the CO2
emissions determined from testing under paragraph (c)(6)(ii)(B) of this
section and round to the nearest 0.1 grams/mile. If the result is less
than or equal to zero, the air conditioning system is not eligible to
generate credits. If the result is greater than or equal to the total
of the gram per mile credits determined in paragraph (c)(2) of this
section, then the air conditioning system is eligible to generate the
maximum allowable value determined in paragraph (c)(2) of this section.
If the result is greater than zero but less than the total of the gram
per mile credits determined in paragraph (c)(2) of this section, then
the air conditioning system is eligible to generate credits in the
amount determined by subtracting the CO2 emissions
determined from testing under paragraph (c)(6)(ii)(A) of this section
from the CO2 emissions determined from testing under
paragraph (c)(6)(ii)(B) of this section and rounding to the nearest 0.1
grams/mile.
(iii) For the first model year for which an air conditioning system
is expected to generate credits, the manufacturer must select for
testing the highest-selling subconfiguration within each vehicle
platform that uses the air conditioning system. Credits may continue to
be generated by the air conditioning system installed in a vehicle
platform provided that:
(A) The air conditioning system components and/or control
strategies do not change in any way that could be expected to cause a
change in its efficiency;
(B) The vehicle platform does not change in design such that the
changes could be expected to cause a change in the efficiency of the
air conditioning system; and
(C) The manufacturer continues to test at least one sub-
configuration within each platform using the air conditioning system,
in each model year, until all sub-configurations within each platform
have been tested.
(iv) Each air conditioning system must be tested and must meet the
testing criteria in order to be allowed to generate credits. Using good
engineering judgment, in the first model year for which an air
conditioning system is expected to generate credits, the manufacturer
must select for testing the highest-selling subconfiguration within
each vehicle platform using the air conditioning system. Credits may
continue to be generated by an air conditioning system in subsequent
model years if the manufacturer continues to test at least one sub-
configuration within each platform on an annual basis, as long as the
air conditioning system and vehicle platform do not change
substantially.
(7) AC17 reporting requirements for model years 2014 through 2016.
As an alternative to the use of the Air Conditioning Idle Test to
demonstrate eligibility to generate air conditioning efficiency
credits, manufacturers may use the provisions of this paragraph (c)(7).
(i) The manufacturer shall perform the AC17 test specified in Sec.
86.167-14 of this part on each vehicle platform for which the
manufacturer intends to accrue air conditioning efficiency credits and
report the results separately for all four phases of the test to the
Environmental Protection Agency.
(ii) The manufacturer shall also report the following information
for each vehicle tested: The vehicle class, model type, curb weight,
engine displacement, transmission class and configuration, interior
volume, climate control system type and characteristics, refrigerant
used, compressor type, and evaporator/condenser characteristics.
(d) Off-cycle credits. Manufacturers may generate credits for
CO2-reducing technologies where the CO2 reduction
benefit of the technology is not adequately captured on the Federal
Test Procedure and/or the Highway Fuel Economy Test. These technologies
must have a measurable, demonstrable, and verifiable real-world
CO2 reduction that occurs outside the conditions of the
Federal Test Procedure and the Highway Fuel Economy Test. These
optional credits are referred to as ``off-cycle'' credits. Off-cycle
technologies used to generate emission credits are considered emission-
related components subject to applicable requirements, and must be
demonstrated to be effective for the full useful life of the vehicle.
Unless the manufacturer demonstrates that the technology is not subject
to in-use deterioration, the manufacturer must account for the
deterioration in their analysis. The manufacturer must use one of the
three options specified in this paragraph (d) to determine the
CO2 gram per mile credit applicable to an off-cycle
technology. Note that the option provided in paragraph (d)(1) of this
section applies only to the 2017 and later model years. The
manufacturer should notify EPA in their pre-model year report of their
intention to generate any credits under this paragraph (d).
(1) Credit available for certain off-cycle technologies. The
provisions of this paragraph (d)(1) are applicable only to 2017 and
later model year vehicles.
(i) The manufacturer may generate a CO2 gram/mile credit
for certain technologies as specified in the following table, provided
that each technology is applied to the minimum percentage of the
manufacturer's total U.S. production of passenger automobiles and light
trucks specified in the table in each model year for which credit is
claimed. Technology definitions are in paragraph (d)(1)(iv) of this
section.
[[Page 75381]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.724
(A) Credits may also be accrued for thermal control technologies as
defined in paragraph (d)(1)(iv) of this section in the amounts shown in
the following table:
[[Page 75382]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.725
(B) The maximum credit allowed for thermal control technologies is
limited to 3.0 g/mi for passenger automobiles and to 4.3 g/mi for light
trucks. The maximum credit allowed for glass or glazing is limited to
3.0 g/mi for passenger automobiles and to 4.3 g/mi for light trucks.
(C) Glass or glazing credits are calculated using the following
equation:
[GRAPHIC] [TIFF OMITTED] TP01DE11.726
Where:
Credit = the total glass or glazing credits, in grams per mile, for
a vehicle, which may not exceed 3.0 g/mi for passenger automobiles
or 4.3 g/mi for light trucks;
Z = 0.3 for passenger automobiles and 0.4 for light trucks;
Gi = the measured glass area of window i, in square meters and
rounded to the nearest tenth;
G = the total glass area of the vehicle, in square meters and
rounded to the nearest tenth;
Ti = the estimated temperature reduction for the glass area of
window i, determined using the following formula:
[GRAPHIC] [TIFF OMITTED] TP01DE11.727
Where:
Ttsnew = the total solar transmittance of the glass,
measured according to ISO 13837, ``Safety glazing materials--Method
for determination of solar transmittance'' (incorporated by
reference; see Sec. 86.1).
Ttsbase = 62 for the windshield, side-front, side-rear,
rear-quarter, and backlite locations, and 40 for rooflite locations.
(ii) The maximum allowable decrease in the manufacturer's combined
passenger automobile and light truck fleet average CO2
emissions attributable to use of the default credit values in paragraph
(d)(1)(i) of this section is 10 grams per mile. If the total of the
CO2 g/mi credit values from the table in paragraph (d)(1)(i)
of this section does not exceed 10 g/mi for any passenger automobile or
light truck in a manufacturer's fleet, then the total off-cycle credits
may be calculated according to paragraph (d)(5) of this section. If the
total of the CO2 g/mi credit values from the table in
paragraph (d)(1)(i) of this section exceeds 10 g/mi for any passenger
automobile or light truck in a manufacturer's fleet, then the gram per
mile decrease for the combined passenger automobile and light truck
fleet must be determined according to paragraph (d)(1)(ii)(A) of this
section to determine whether the 10 g/mi limitation has been exceeded.
(A) Determine the gram per mile decrease for the combined passenger
automobile and light truck fleet using the following formula:
[GRAPHIC] [TIFF OMITTED] TP01DE11.728
Where:
Credits = The total of passenger automobile and light truck credits,
in Megagrams, determined according to paragraph (d)(5) of this
section and limited to those credits accrued by using the default
gram per mile values in paragraph (d)(1)(i) of this section.
ProdC = The number of passenger automobiles produced by
the manufacturer and delivered for sale in the U.S.
ProdT = The number of light trucks produced by the
manufacturer and delivered for sale in the U.S.
(B) If the value determined in paragraph (d)(1)(ii)(A) of this
section is greater than 10 grams per mile, the total credits, in
Megagrams, that may be accrued by a manufacturer using the default gram
per mile values in paragraph (d)(1)(i) of this section shall be
determined using the following formula:
[[Page 75383]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.729
Where:
ProdC = The number of passenger automobiles produced by
the manufacturer and delivered for sale in the U.S.
ProdT = The number of light trucks produced by the
manufacturer and delivered for sale in the U.S.
(C) If the value determined in paragraph (d)(1)(ii)(A) of this
section is not greater than 10 grams per mile, then the credits that
may be accrued by a manufacturer using the default gram per mile values
in paragraph (d)(1)(i) of this section do not exceed the allowable
limit, and total credits may be determined for each category of
vehicles according to paragraph (d)(5) of this section.
(D) If the value determined in paragraph (d)(1)(ii)(A) of this
section is greater than 10 grams per mile, then the combined passenger
automobile and light truck credits, in Megagrams, that may be accrued
using the calculations in paragraph (d)(5) of this section must not
exceed the value determined in paragraph (d)(1)(ii)(B) of this section.
This limitation should generally be done by reducing the amount of
credits attributable to the vehicle category that caused the limit to
be exceeded such that the total value does not exceed the value
determined in paragraph (d)(1)(ii)(B) of this section.
(iii) In lieu of using the default gram per mile values specified
in paragraph (d)(1)(i) of this section for specific technologies, a
manufacturer may determine an alternative value for any of the
specified technologies. An alternative value must be determined using
one of the methods specified in paragraph (d)(2) or (3) of this
section.
(iv) Definitions for the purposes of this paragraph (d)(1) are as
follows:
(A) Active aerodynamic improvements means technologies that are
activated only at certain speeds to improve aerodynamic efficiency by a
minimum of three percent, while preserving other vehicle attributes or
functions.
(B) Electric heater circulation pump means a pump system installed
in a stop-start equipped vehicle or in a hybrid electric vehicle or
plug-in hybrid electric vehicle that continues to circulate hot coolant
through the heater core when the engine is stopped during a stop-start
event. This system must be calibrated to keep the engine off for 1
minute or more when the external ambient temperature is 30 deg F.
(C) High efficiency exterior lighting means a lighting technology
that, when installed on the vehicle, is expected to reduce the total
electrical demand of the exterior lighting system by a minimum of 60
watts when compared to conventional lighting systems. To be eligible
for this credit the high efficiency lighting must be installed in the
following components: Parking/position, front and rear turn signals,
front and rear side markers, stop/brake lights (including the center-
mounted location), taillights, backup/reverse lights, and license plate
lighting.
(D) Engine start-stop means a technology which enables a vehicle to
automatically turn off the engine when the vehicle comes to a rest and
restart the engine when the driver applies pressure to the accelerator
or releases the brake. Off-cycle engine start-stop credits will only be
allowed if the Administrator has made a determination under the testing
and calculation provisions in 40 CFR part 600 that engine start-stop is
the predominant operating mode.
(E) Solar roof panels means the installation of solar panels on an
electric vehicle or a plug-in hybrid electric vehicle such that the
solar energy is used to provide energy to the electric drive system of
the vehicle by charging the battery or directly providing power to the
electric motor with the equivalent of at least 50 Watts of rated
electricity output.
(F) Active transmission warmup means a system that uses waste heat
from the exhaust system to warm the transmission fluid to an operating
temperature range quickly using a heat exchanger in the exhaust system,
increasing the overall transmission efficiency by reducing parasitic
losses associated with the transmission fluid, such as losses related
to friction and fluid viscosity.
(G) Active engine warmup means a system using waste heat from the
exhaust system to warm up targeted parts of the engine so that it
reduces engine friction losses and enables the closed-loop fuel control
more quickly. It would allow a faster transition from cold operation to
warm operation, decreasing CO2 emissions, and increasing
fuel economy.
(H) Engine heat recovery means a system that captures heat that
would otherwise be lost through the exhaust system or through the
radiator and converting that heat to electrical energy that is used to
meet the electrical requirements of the vehicle. Such a system must
have a capacity of at least 100W to achieve 0.7 g/mi of credit. Every
additional 100W of capacity will result in an additional 0.7 g/mi of
credit.
(I) Active seat ventilation means a device which draws air from the
seating surface which is in contact with the occupant and exhausts it
to a location away from the seat.
(J) Solar reflective paint means a vehicle paint or surface coating
which reflects at least 65 percent of the impinging infrared solar
energy, as determined using ASTM standards E903, E1918-06, or C1549-09.
These ASTM standards are incorporated by reference; see Sec. 86.1.
(K) Passive cabin ventilation means ducts or devices which utilize
convective airflow to move heated air from the cabin interior to the
exterior of the vehicle.
(L) Active cabin ventilation means devices which mechanically move
heated air from the cabin interior to the exterior of the vehicle.
(2) Technology demonstration using EPA 5-cycle methodology. To
demonstrate an off-cycle technology and to determine a CO2
credit using the EPA 5-cycle methodology, the manufacturer shall
determine the off-cycle city/highway combined carbon-related exhaust
emissions benefit by using the EPA 5-cycle methodology described in 40
CFR Part 600. Testing shall be performed on a representative vehicle,
selected using good engineering judgment, for each model type for which
the credit is being demonstrated. The emission benefit of a technology
is determined by testing both with and without the off-cycle technology
operating. Multiple off-cycle technologies may be demonstrated on a
test vehicle. The manufacturer shall conduct the following steps and
submit all test data to the EPA.
(i) Testing without the off-cycle technology installed and/or
operating. Determine carbon-related exhaust emissions over the FTP, the
HFET, the US06, the SC03, and the cold temperature FTP test procedures
according to the test procedure provisions specified in 40 CFR part 600
subpart B and using the calculation procedures specified in Sec.
600.113-08 of this chapter. Run each of these tests a minimum of three
times without the off-cycle technology installed and operating and
average the per phase (bag) results
[[Page 75384]]
for each test procedure. Calculate the 5-cycle weighted city/highway
combined carbon-related exhaust emissions from the averaged per phase
results, where the 5-cycle city value is weighted 55% and the 5-cycle
highway value is weighted 45%. The resulting combined city/highway
value is the baseline 5-cycle carbon-related exhaust emission value for
the vehicle.
(ii) Testing with the off-cycle technology installed and/or
operating. Determine carbon-related exhaust emissions over the US06,
the SC03, and the cold temperature FTP test procedures according to the
test procedure provisions specified in 40 CFR part 600 subpart B and
using the calculation procedures specified in Sec. 600.113-08 of this
chapter. Run each of these tests a minimum of three times with the off-
cycle technology installed and operating and average the per phase
(bag) results for each test procedure. Calculate the 5-cycle weighted
city/highway combined carbon-related exhaust emissions from the
averaged per phase results, where the 5-cycle city value is weighted
55% and the 5-cycle highway value is weighted 45%. Use the averaged per
phase results for the FTP and HFET determined in paragraph (d)(2)(i) of
this section for operation without the off-cycle technology in this
calculation. The resulting combined city/highway value is the 5-cycle
carbon-related exhaust emission value showing the off-cycle benefit of
the technology but excluding any benefit of the technology on the FTP
and HFET.
(iii) Subtract the combined city/highway value determined in
paragraph (d)(2)(i) of this section from the value determined in
paragraph (d)(2)(ii) of this section. The result is the off-cycle
benefit of the technology or technologies being evaluated. If this
benefit is greater than or equal to three percent of the value
determined in paragraph (d)(2)(i) of this section then the manufacturer
may use this value, rounded to the nearest tenth of a gram per mile, to
determine credits under paragraph (d)(4) of this section.
(iv) If the value calculated in paragraph (d)(2)(iii) of this
section is less than three percent of the value determined in paragraph
(d)(2)(i) of this section, then the manufacturer must repeat the
testing required under paragraphs (d)(2)(i) and (ii) of this section,
except instead of running each test three times they shall run each
test two additional times. The off-cycle benefit of the technology or
technologies being evaluated shall be calculated as in paragraph
(d)(2)(iii) of this section using all the tests conducted under
paragraph (d) of this section. If the value calculated in paragraph
(d)(2)(iii) of this section is less than three percent of the value
determined in paragraph (d)(2)(i) of this section, then the
manufacturer must verify the emission reduction potential of the off-
cycle technology or technologies using the EPA Vehicle Simulation Tool
(incorporated by reference; see Sec. 86.1), and if the results support
a credit value that is less than three percent of the value determined
in paragraph (d)(2)(i) of this section then the manufacturer may use
the off-cycle benefit of the technology or technologies calculated as
in paragraph (d)(2)(iii) of this section using all the tests conducted
under paragraph (d) of this section, rounded to the nearest tenth of a
gram per mile, to determine credits under paragraph (d)(4) of this
section.
(3) Technology demonstration using alternative EPA-approved
methodology. (i) This option may be used only with EPA approval, and
the manufacturer must be able to justify to the Administrator why the
5-cycle option described in paragraph (d)(2) of this section
insufficiently characterizes the effectiveness of the off-cycle
technology. In cases where the EPA 5-cycle methodology described in
paragraph (d)(2) of this section cannot adequately measure the emission
reduction attributable to an innovative off-cycle technology, the
manufacturer may develop an alternative approach. Prior to a model year
in which a manufacturer intends to seek these credits, the manufacturer
must submit a detailed analytical plan to EPA. The manufacturer may
seek EPA input on the proposed methodology prior to conducting testing
or analytical work, and EPA will provide input on the manufacturer's
analytical plan. The alternative demonstration program must be approved
in advance by the Administrator and should:
(A) Use modeling, on-road testing, on-road data collection, or
other approved analytical or engineering methods;
(B) Be robust, verifiable, and capable of demonstrating the real-
world emissions benefit with strong statistical significance;
(C) Result in a demonstration of baseline and controlled emissions
over a wide range of driving conditions and number of vehicles such
that issues of data uncertainty are minimized;
(D) Result in data on a model type basis unless the manufacturer
demonstrates that another basis is appropriate and adequate.
(ii) Notice and opportunity for public comment. The Administrator
will publish a notice of availability in the Federal Register notifying
the public of a manufacturer's proposed alternative off-cycle credit
calculation methodology. The notice will include details regarding the
proposed methodology, but will not include any Confidential Business
Information. The notice will include instructions on how to comment on
the methodology. The Administrator will take public comments into
consideration in the final determination, and will notify the public of
the final determination. Credits may not be accrued using an approved
methodology until the first model year for which the Administrator has
issued a final approval.
(4) Review and approval process for off-cycle credits. (i) Initial
steps required. (A) A manufacturer requesting off-cycle credits under
the provisions of paragraph (d)(2) of this section must conduct the
testing and/or simulation described in that paragraph.
(B) A manufacturer requesting off-cycle credits under the
provisions of paragraph (d)(3) of this section must develop a
methodology for demonstrating and determining the benefit of the off-
cycle technology, and carry out any necessary testing and analysis
required to support that methodology.
(C) A manufacturer requesting off-cycle credits under paragraph (d)
of this section must conduct testing and/or prepare engineering
analyses that demonstrate the in-use durability of the technology for
the full useful life of the vehicle.
(ii) Data and information requirements. The manufacturer seeking
off-cycle credits must submit an application for off-cycle credits
determined under paragraphs (d)(2) and (d)(3) of this section. The
application must contain the following:
(A) A detailed description of the off-cycle technology and how it
functions to reduce CO2 emissions under conditions not
represented on the FTP and HFET.
(B) A list of the vehicle model(s) which will be equipped with the
technology.
(C) A detailed description of the test vehicles selected and an
engineering analysis that supports the selection of those vehicles for
testing.
(D) All testing and/or simulation data required under paragraph
(d)(2) or (d)(3) of this section, as applicable, plus any other data
the manufacturer has considered in the analysis.
(E) For credits under paragraph (d)(3) of this section, a complete
description of the methodology used to estimate the off-cycle benefit
of the technology and all supporting data, including vehicle testing
and in-use activity data.
[[Page 75385]]
(F) An estimate of the off-cycle benefit by vehicle model and the
fleetwide benefit based on projected sales of vehicle models equipped
with the technology.
(G) An engineering analysis and/or component durability testing
data or whole vehicle testing data demonstrating the in-use durability
of the off-cycle technology components.
(iii) EPA review of the off-cycle credit application. Upon receipt
of an application from a manufacturer, EPA will do the following:
(A) Review the application for completeness and notify the
manufacturer within 30 days if additional information is required.
(B) Review the data and information provided in the application to
determine if the application supports the level of credits estimated by
the manufacturer.
(C) For credits under paragraph (d)(3) of this section, EPA will
make the application available to the public for comment, as described
in paragraph (d)(3)(ii) of this section, within 60 days of receiving a
complete application. The public review period will be specified as 30
days, during which time the public may submit comments. Manufacturers
may submit a written rebuttal of comments for EPA consideration or may
revise their application in response to comments. A revised application
should be submitted after the end of the public review period, and EPA
will review the application as if it was a new application submitted
under this paragraph (d)(4)(iii).
(iv) EPA decision. (A) For credits under paragraph (d)(2) of this
section, EPA will notify the manufacturer of its decision within 60
days of receiving a complete application.
(B) For credits under paragraph (d)(3) of this section, EPA will
notify the manufacturer of its decision after reviewing and evaluating
the public comments. EPA will make the decision and rationale available
to the public.
(C) EPA will notify the manufacturer in writing of its decision to
approve or deny the application, and will provide the reasons for the
decision. EPA will make the decision and rationale available to the
public.
(5) Calculation of total off-cycle credits. Total off-cycle credits
in Megagrams of CO2 (rounded to the nearest whole number)
shall be calculated separately for passenger automobiles and light
trucks according to the following formula:
Total Credits (Megagrams) = (Credit x Production x VLM) / 1,000,000
Where:
Credit = the credit value in grams per mile determined in paragraph
(d)(1), (d)(2) or (d)(3) of this section.
Production = The total number of passenger automobiles or light
trucks, whichever is applicable, produced with the off-cycle
technology to which to the credit value determined in paragraph
(d)(1), (d)(2), or (d)(3) of this section applies.
VLM = vehicle lifetime miles, which for passenger automobiles shall
be 195,264 and for light trucks shall be 225,865.
(e) Credits for certain full-size pickup trucks. Full-size pickup
trucks may be eligible for additional credits based on the
implementation of hybrid technologies or on exhaust emission
performance, as described in this paragraph (e). Credits may be
generated under either paragraph (e)(2) or (e)(3) of this section for a
qualifying pickup truck, but not both.
(1) The following definitions apply for the purposes of this
paragraph (e).
(i) Full size pickup truck means a light truck which has a
passenger compartment and an open cargo box and which meets the
following specifications:
(A) A minimum cargo bed width between the wheelhouses of 48 inches,
measured as the minimum lateral distance between the limiting
interferences (pass-through) of the wheelhouses. The measurement shall
exclude the transitional arc, local protrusions, and depressions or
pockets, if present. An open cargo box means a vehicle where the cargo
box does not have a permanent roof. Vehicles sold with detachable
covers are considered ``open'' for the purposes of these criteria.
(B) A minimum open cargo box length of 60 inches, where the length
is defined by the lesser of the pickup bed length at the top of the
body and the pickup bed length at the floor, where the length at the
top of the body is defined as the longitudinal distance from the inside
front of the pickup bed to the inside of the closed endgate as measured
at the cargo floor surface along vehicle centerline, and the length at
the floor is defined as the longitudinal distance from the inside front
of the pickup bed to the inside of the closed endgate as measured at
the cargo floor surface along vehicle centerline.
(C) A minimum towing capability of 5,000 pounds, where minimum
towing capability is determined by subtracting the gross vehicle weight
rating from the gross combined weight rating, or a minimum payload
capability of 1,700 pounds, where minimum payload capability is
determined by subtracting the curb weight from the gross vehicle weight
rating.
(ii) Mild hybrid gasoline-electric vehicle means a vehicle that has
start/stop capability and regenerative braking capability, where the
recaptured braking energy over the Federal Test Procedure is at least
15 percent but less than 75 percent of the total braking energy, where
the percent of recaptured braking energy is measured and calculated
according to Sec. 600.116-12(c).
(iii) Strong hybrid gasoline-electric vehicle means a vehicle that
has start/stop capability and regenerative braking capability, where
the recaptured braking energy over the Federal Test Procedure is at
least 75 percent of the total braking energy, where the percent of
recaptured braking energy is measured and calculated according to Sec.
600.116-12(c).
(2) Credits for implementation of gasoline-electric hybrid
technology. Full size pickup trucks that implement hybrid gasoline-
electric technologies may be eligible for an additional credit under
this paragraph (e)(2). Pickup trucks using the credits under this
paragraph (e)(2) may not use the credits described in paragraph (e)(3)
of this section.
(i) Full size pickup trucks that are mild hybrid gasoline-electric
vehicles and that are produced in the 2017 through 2021 model years are
eligible for a credit of 10 grams/mile. To receive this credit, the
manufacturer must produce a quantity of mild hybrid full size pickup
trucks such that the proportion of production of such vehicles, when
compared to the manufacturer's total production of full size pickup
trucks, is not less than the amount specified in the table below for
each model year.
[[Page 75386]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.730
(ii) Full size pickup trucks that are strong hybrid gasoline-
electric vehicles and that are produced in the 2017 through 2025 model
years are eligible for a credit of 20 grams/mile. To receive this
credit, the manufacturer must produce a quantity of strong hybrid full
size pickup trucks such that the proportion of production of such
vehicles, when compared to the manufacturer's total production of full
size pickup trucks, is not less than 10 percent for each model year.
(3) Credits for emission reduction performance. Full size pickup
trucks that achieve carbon-related exhaust emission values below the
applicable target value determined in 86.1818-12(c)(3) may be eligible
for an additional credit. For the purposes of this paragraph (e)(3),
carbon-related exhaust emission values may include any applicable air
conditioning leakage and/or efficiency credits as determined in
paragraphs (b) and (c) of this section. Pickup trucks using the credits
under this paragraph (e)(3) may not use the credits described in
paragraph (e)(2) of this section or the production multipliers
described in paragraph (a)(2) of this section.
(i) Full size pickup trucks that achieve carbon-related exhaust
emissions less than or equal to the applicable target value determined
in 86.1818-12(c)(3) multiplied by 0.85 (rounded to the nearest gram/
mile) and greater than the applicable target value determined in
86.1818-12(c)(3) multiplied by 0.80 (rounded to the nearest gram/mile)
in a model year are eligible for a credit of 10 grams/mile. A pickup
truck that qualifies for this credit in a model year may claim this
credit for subsequent model years through the 2021 model year if the
carbon-related exhaust emissions of that pickup truck do not increase
relative to the emissions in the model year in which the pickup truck
qualified for the credit. To qualify for this credit in each model
year, the manufacturer must produce a quantity of full size pickup
trucks that meet the initial emission eligibility requirements of this
paragraph (e)(3)(i) such that the proportion of production of such
vehicles, when compared to the manufacturer's total production of full
size pickup trucks, is not less than the amount specified in the table
below for each model year.
[[Page 75387]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.731
(ii) Full size pickup trucks that achieve carbon-related exhaust
emissions less than or equal to the applicable target value determined
in 86.1818-12(c)(3) multiplied by 0.80 (rounded to the nearest gram/
mile) in a model year are eligible for a credit of 20 grams/mile. A
pickup truck that qualifies for this credit in a model year may claim
this credit for a maximum of five subsequent model years if the carbon-
related exhaust emissions of that pickup truck do not increase relative
to the emissions in the model year in which the pickup truck first
qualified for the credit. This credit may not be claimed in any model
year after 2025. To qualify for this credit, the manufacturer must
produce a quantity of full size pickup trucks that meet the emission
requirements of this paragraph (e)(3)(i) such that the proportion of
production of such vehicles, when compared to the manufacturer's total
production of full size pickup trucks, is not less than 10 percent in
each model year. A pickup truck that qualifies for this credit in a
model year and is subject to a major redesign in a subsequent model
year such that it qualifies for the credit in the model year of the
redesign may be allowed to qualify for an additional five years (not to
go beyond the 2025 model year) with the approval of the Administrator.
(4) Calculation of total full size pickup truck credits. Total
credits in Megagrams of CO2 (rounded to the nearest whole
number) shall be calculated for qualifying full size pickup trucks
according to the following formula:
Total Credits (Megagrams) = ([(10 x Production10) + (20 x
Production20)] x 225,865) / 1,000,000
Where:
Production10 = The total number of full size pickup
trucks produced with a credit value of 10 grams per mile from
paragraphs (e)(2) and (e)(3).
Production20 = The total number of full size pickup
trucks produced with a credit value of 20 grams per mile from
paragraphs (e)(2) and (e)(3).
17. Section 86.1867-12 is amended by revising paragraph (a)(2)(i)
to read as follows:
Sec. 86.1867-12 Optional early CO2 credit programs.
* * * * *
(a) * * *
(2) * * *
(i) Credits under this pathway shall be calculated according to the
provisions of paragraph (a)(1) of this section, except credits may only
be generated by vehicles sold in a model year in California and in
states with a section 177 program in effect in that model year. For the
purposes of this section, ``section 177 program'' means State
regulations or other laws that apply to vehicle emissions from any of
the following categories of motor vehicles: Passenger automobiles,
light-duty trucks up through 6,000 pounds GVWR, and medium-duty
vehicles from 6,001 to 14,000 pounds GVWR, as these categories of motor
vehicles are defined in the California Code of Regulations, Title 13,
Division 3, Chapter 1, Article 1, Section 1900.
* * * * *
PART 600--FUEL ECONOMY AND GREENHOUSE GAS EXHAUST EMISSIONS OF
MOTOR VEHICLES
18. The authority citation for part 600 continues to read as
follows:
Authority: 49 U.S.C. 32901--23919q, Pub. L. 109-58.
Subpart B--[Amended]
19. Section 600.002 is amended by revising the definitions of
``combined fuel economy'' and ``fuel economy'' to read as follows:
Sec. 600.002 Definitions.
* * * * *
Combined fuel economy means:
(1) The fuel economy value determined for a vehicle (or vehicles)
by harmonically averaging the city and highway fuel economy values,
weighted 0.55 and 0.45, respectively.
(2) For electric vehicles, for the purpose of calculating average
fuel economy pursuant to the provisions of part 600, subpart F, the
term means the equivalent petroleum-based fuel economy value as
determined by the calculation procedure promulgated by the Secretary of
Energy. For the purpose of labeling pursuant to the provisions of part
600, subpart D, the term means the fuel economy value as determined by
the procedures specified in Sec. 600.116-12.
* * * * *
Fuel economy means:
(1) The average number of miles traveled by an automobile or group
of automobiles per volume of fuel consumed as calculated in this part;
or
(2) For the purpose of calculating average fuel economy pursuant to
the
[[Page 75388]]
provisions of part 600, subpart F, fuel economy for electrically
powered automobiles means the equivalent petroleum-based fuel economy
as determined by the Secretary of Energy in accordance with the
provisions of 10 CFR part 474. For the purpose of labeling pursuant to
the provisions of part 600, subpart D, the term means the fuel economy
value as determined by the procedures specified in Sec. 600.116-12.
* * * * *
20. Section 600.111-08 is amended by revising the introductory text
to read as follows:
Sec. 600.111-08 Test procedures.
This section provides test procedures for the FTP, highway, US06,
SC03, and the cold temperature FTP tests. Testing shall be performed
according to test procedures and other requirements contained in this
part 600 and in part 86 of this chapter, including the provisions of
part 86, subparts B, C, and S. Test hybrid electric vehicles using the
procedures of SAE J1711 (incorporated by reference in Sec. 600.011).
For FTP testing, this generally involves emission sampling over four
phases (bags) of the UDDS (cold-start, transient, warm-start,
transient); however, these four phases may be combined into two phases
(phases 1 + 2 and phases 3 + 4). Test plug-in hybrid electric vehicles
using the procedures of SAE J1711 (incorporated by reference in Sec.
600.011) as described in Sec. 600.116-12. Test electric vehicles using
the procedures of SAE J1634 (incorporated by reference in Sec.
600.011) as described in Sec. 600.116-12.
* * * * *
21. Section 600.113-12 is amended by revising paragraphs
(g)(2)(iv)(C) and (j) through (m) to read as follows:
Sec. 600.113-12 Fuel economy, CO2 emissions, and carbon-
related exhaust emission calculations for FTP, HFET, US06, SC03 and
cold temperature FTP tests.
* * * * *
(g) * * *
(2) * * *
(iv) * * *
(C) For the 2012 through 2016 model years only, manufacturers may
use an assigned value of 0.010 g/mi for N2O FTP and HFET
test values. This value is not required to be adjusted by a
deterioration factor.
* * * * *
(j)(1) For methanol-fueled automobiles and automobiles designed to
operate on mixtures of gasoline and methanol, the fuel economy in miles
per gallon of methanol is to be calculated using the following
equation:
mpg = (CWF x SG x 3781.8)/((CWFexHC x HC) + (0.429 x CO) +
(0.273 x CO2) + (0.375 x CH3OH) + (0.400 x HCHO))
Where
CWF = Carbon weight fraction of the fuel as determined in paragraph
(f)(2)(ii) of this section and rounded according to paragraph (g)(3)
of this section.
SG = Specific gravity of the fuel as determined in paragraph
(f)(2)(i) of this section and rounded according to paragraph (g)(3)
of this section.
CWFexHC = Carbon weight fraction of exhaust hydrocarbons
= CWF as determined in paragraph (f)(2)(ii) of this section and
rounded according to paragraph (g)(3) of this section (for M100
fuel, CWFexHC = 0.866).
HC = Grams/mile HC as obtained in paragraph (g)(1) of this section.
CO = Grams/mile CO as obtained in paragraph (g)(1) of this section.
CO2 = Grams/mile CO2 as obtained in paragraph
(g)(1) of this section.
CH3OH = Grams/mile CH3OH (methanol) as
obtained in paragraph (g)(1) of this section.
HCHO = Grams/mile HCHO (formaldehyde) as obtained in paragraph
(g)(1) of this section.
(2)(i) For 2012 and later model year methanol-fueled automobiles
and automobiles designed to operate on mixtures of gasoline and
methanol, the carbon-related exhaust emissions in grams per mile while
operating on methanol is to be calculated using the following equation
and rounded to the nearest 1 gram per mile:
CREE = (CWFexHC/0.273 x HC) + (1.571 x CO) + (1.374 x
CH3OH) + (1.466 x HCHO) + CO2
Where:
CREE means the carbon-related exhaust emission value as defined in
Sec. 600.002.
CWFexHC = Carbon weight fraction of exhaust hydrocarbons
= CWF as determined in paragraph (f)(2)(ii) of this section and
rounded according to paragraph (g)(3) of this section (for M100
fuel, CWFexHC = 0.866).
HC = Grams/mile HC as obtained in paragraph (g)(2) of this section.
CO = Grams/mile CO as obtained in paragraph (g)(2) of this section.
CO2 = Grams/mile CO2 as obtained in paragraph
(g)(2) of this section.
CH3OH = Grams/mile CH3OH (methanol) as
obtained in paragraph (g)(2) of this section.
HCHO = Grams/mile HCHO (formaldehyde) as obtained in paragraph
(g)(2) of this section.
(ii) For manufacturers complying with the fleet averaging option
for N2O and CH4 as allowed under Sec. 86.1818 of
this chapter, the carbon-related exhaust emissions in grams per mile
for 2012 and later model year methanol-fueled automobiles and
automobiles designed to operate on mixtures of gasoline and methanol
while operating on methanol is to be calculated using the following
equation and rounded to the nearest 1 gram per mile:
CREE = [(CWFexHC/0.273) x NMHC] + (1.571 x CO) + (1.374 x
CH3OH) + (1.466 x HCHO) + CO2 + (298 x
N2O) + (25 x CH4)
Where:
CREE means the carbon-related exhaust emission value as defined in
Sec. 600.002.
CWFexHC = Carbon weight fraction of exhaust hydrocarbons
= CWF as determined in paragraph (f)(2)(ii) of this section and
rounded according to paragraph (g)(3) of this section (for M100
fuel, CWFexHC = 0.866).
NMHC = Grams/mile HC as obtained in paragraph (g)(2) of this
section.
CO = Grams/mile CO as obtained in paragraph (g)(2) of this section.
CO2 = Grams/mile CO2 as obtained in paragraph
(g)(2) of this section.
CH3OH = Grams/mile CH3OH (methanol) as
obtained in paragraph (g)(2) of this section.
HCHO = Grams/mile HCHO (formaldehyde) as obtained in paragraph
(g)(2) of this section.
N2O = Grams/mile N2O as obtained in paragraph
(g)(2) of this section.
CH4 = Grams/mile CH4 as obtained in paragraph
(g)(2) of this section.
(k)(1) For automobiles fueled with natural gas and automobiles
designed to operate on gasoline and natural gas, the fuel economy in
miles per gallon of natural gas is to be calculated using the following
equation:
[GRAPHIC] [TIFF OMITTED] TP01DE11.732
Where:
mpge = miles per gasoline gallon equivalent of natural
gas.
CWFHC/NG = carbon weight fraction based on the
hydrocarbon constituents in the natural gas fuel as obtained in
paragraph (f)(3) of this section and rounded according to paragraph
(g)(3) of this section.
DNG = density of the natural gas fuel [grams/ft\3\ at 68
[deg]F (20 [deg]C) and 760 mm Hg (101.3
[[Page 75389]]
kPa)] pressure as obtained in paragraph (g)(3) of this section.
CH4, NMHC, CO, and CO2 = weighted mass exhaust
emissions [grams/mile] for methane, non-methane HC, carbon monoxide,
and carbon dioxide as obtained in paragraph (g)(2) of this section.
CWFNMHC = carbon weight fraction of the non-methane HC
constituents in the fuel as determined from the speciated fuel
composition per paragraph (f)(3) of this section and rounded
according to paragraph (g)(3) of this section.
CO2NG = grams of carbon dioxide in the natural gas fuel
consumed per mile of travel.
CO2NG = FCNG x DNG x WFCO2
Where:
[GRAPHIC] [TIFF OMITTED] TP01DE11.733
= cubic feet of natural gas fuel consumed per mile
Where:
CWFNG = the carbon weight fraction of the natural gas
fuel as calculated in paragraph (f)(3) of this section.
WFCO2 = weight fraction carbon dioxide of the natural gas
fuel calculated using the mole fractions and molecular weights of
the natural gas fuel constituents per ASTM D 1945 (incorporated by
reference in Sec. 600.011).
(2)(i) For automobiles fueled with natural gas and automobiles designed
to operate on gasoline and natural gas, the carbon-related exhaust
emissions in grams per mile while operating on natural gas is to be
calculated for 2012 and later model year vehicles using the following
equation and rounded to the nearest 1 gram per mile:
CREE = 2.743 x CH4 + CWFNMHC/0.273 x NMHC + 1.571
x CO + CO2
Where:
CREE means the carbon-related exhaust emission value as defined in
Sec. 600.002.
CH4 = Grams/mile CH4 as obtained in paragraph
(g)(2) of this section.
NMHC = Grams/mile NMHC as obtained in paragraph (g)(2) of this
section.
CO = Grams/mile CO as obtained in paragraph (g)(2) of this section.
CO2 = Grams/mile CO2 as obtained in paragraph
(g)(2) of this section.
CWFNMHC = carbon weight fraction of the non-methane HC
constituents in the fuel as determined from the speciated fuel
composition per paragraph (f)(3) of this section and rounded
according to paragraph (f)(3) of this section.
(ii) For manufacturers complying with the fleet averaging option
for N2O and CH4 as allowed under Sec. 86.1818 of
this chapter, the carbon-related exhaust emissions in grams per mile
for 2012 and later model year automobiles fueled with natural gas and
automobiles designed to operate on gasoline and natural gas while
operating on natural gas is to be calculated using the following
equation and rounded to the nearest 1 gram per mile:
CREE = (25 x CH4) + [(CWFNMHC/0.273) x NMHC] +
(1.571 x CO) + CO2 + (298 x N2O)
Where:
CREE means the carbon-related exhaust emission value as defined in
Sec. 600.002.
CH4 = Grams/mile CH4as obtained in paragraph
(g)(2) of this section.
NMHC = Grams/mile NMHC as obtained in paragraph (g)(2) of this
section.
CO = Grams/mile CO as obtained in paragraph (g)(2) of this section.
CO2 = Grams/mile CO2 as obtained in paragraph
(g)(2) of this section.
CWFNMHC = carbon weight fraction of the non-methane HC
constituents in the fuel as determined from the speciated fuel
composition per paragraph (f)(3) of this section and rounded
according to paragraph (f)(3) of this section.
N2O = Grams/mile N2O as obtained in paragraph
(g)(2) of this section.
(l)(1) For ethanol-fueled automobiles and automobiles designed to
operate on mixtures of gasoline and ethanol, the fuel economy in miles
per gallon of ethanol is to be calculated using the following equation:
mpg = (CWF x SG x 3781.8)/((CWFexHCx HC) + (0.429 x CO) +
(0.273 x CO2) + (0.375 x CH3OH) + (0.400 x HCHO)
+ (0.521 x C2H5OH) + (0.545 x
C2H4O))
Where:
CWF = Carbon weight fraction of the fuel as determined in paragraph
(f)(4) of this section and rounded according to paragraph (f)(3) of
this section.
SG = Specific gravity of the fuel as determined in paragraph (f)(4)
of this section and rounded according to paragraph (f)(3) of this
section.
CWFexHC = Carbon weight fraction of exhaust hydrocarbons
= CWF as determined in paragraph (f)(4) of this section and rounded
according to paragraph (f)(3) of this section.
HC = Grams/mile HC as obtained in paragraph (g)(1) of this section.
CO = Grams/mile CO as obtained in paragraph (g)(1) of this section.
CO2 = Grams/mile CO2 as obtained in paragraph
(g)(1) of this section.
CH3OH = Grams/mile CH3OH (methanol) as
obtained in paragraph (g)(1) of this section.
HCHO = Grams/mile HCHO (formaldehyde) as obtained in paragraph
(g)(1) of this section.
C2H5OH = Grams/mile
C2H5OH (ethanol) as obtained in paragraph
(g)(1) of this section.
C2H4O = Grams/mile C2H4O
(acetaldehyde) as obtained in paragraph (g)(1) of this section.
(2)(i) For 2012 and later model year ethanol-fueled automobiles and
automobiles designed to operate on mixtures of gasoline and ethanol,
the carbon-related exhaust emissions in grams per mile while operating
on ethanol is to be calculated using the following equation and rounded
to the nearest 1 gram per mile:
CREE = (CWFexHC/0.273 x HC) + (1.571 x CO) + (1.374 x
CH3OH) + (1.466 x HCHO) + (1.911 x
C2H5OH) + (1.998 x C2H4O) +
CO2
Where:
CREE means the carbon-related exhaust emission value as defined in
Sec. 600.002.
CWFexHC = Carbon weight fraction of exhaust hydrocarbons
= CWF as determined in paragraph (f)(4) of this section and rounded
according to paragraph (f)(3) of this section.
HC = Grams/mile HC as obtained in paragraph (g)(2) of this section.
CO = Grams/mile CO as obtained in paragraph (g)(2) of this section.
CO2 = Grams/mile CO2 as obtained in paragraph
(g)(2) of this section.
CH3OH = Grams/mile CH3OH (methanol) as
obtained in paragraph (g)(2) of this section.
HCHO = Grams/mile HCHO (formaldehyde) as obtained in paragraph
(g)(2) of this section.
C2H5OH = Grams/mile
C2H5OH (ethanol) as obtained in paragraph
(g)(2) of this section.
C2H4O = Grams/mile C2H4O
(acetaldehyde) as obtained in paragraph (g)(2) of this section.
(ii) For manufacturers complying with the fleet averaging option
for N2O and CH4 as allowed under Sec. 86.1818 of
this chapter, the carbon-related exhaust emissions in grams per mile
for 2012 and later model year ethanol-fueled automobiles and
automobiles designed to operate on mixtures of gasoline and ethanol
while operating on ethanol is to be calculated using the following
equation and rounded to the nearest 1 gram per mile:
CREE = [(CWFexHC/0.273) x NMHC] + (1.571 x CO) + (1.374 x
CH3OH) + (1.466 x HCHO) + (1.911 x
C2H5OH)
[[Page 75390]]
+ (1.998 x C2H4O) + CO2 + (298 x
N2O) + (25 x CH4)
Where:
CREE means the carbon-related exhaust emission value as defined in
Sec. 600.002.
CWFexHC = Carbon weight fraction of exhaust hydrocarbons
= CWF as determined in paragraph (f)(4) of this section and rounded
according to paragraph (f)(3) of this section.
NMHC = Grams/mile HC as obtained in paragraph (g)(2) of this
section.
CO = Grams/mile CO as obtained in paragraph (g)(2) of this section.
CO2 = Grams/mile CO2 as obtained in paragraph
(g)(2) of this section.
CH3OH = Grams/mile CH3OH (methanol) as
obtained in paragraph (g)(2) of this section.
HCHO = Grams/mile HCHO (formaldehyde) as obtained in paragraph
(g)(2) of this section.
C2H5OH = Grams/mile
C2H5OH (ethanol) as obtained in paragraph
(g)(2) of this section.
C2H4O = Grams/mile C2H4O
(acetaldehyde) as obtained in paragraph (g)(2) of this section.
N2O = Grams/mile N2O as obtained in paragraph
(g)(2) of this section.
CH4 = Grams/mile CH4 as obtained in paragraph
(g)(2) of this section.
(m) Manufacturers shall determine CO2 emissions and
carbon-related exhaust emissions for electric vehicles, fuel cell
vehicles, and plug-in hybrid electric vehicles according to the
provisions of this paragraph (m). Subject to the limitations on the
number of vehicles produced and delivered for sale as described in
Sec. 86.1866 of this chapter, the manufacturer may be allowed to use a
value of 0 grams/mile to represent the emissions of fuel cell vehicles
and the proportion of electric operation of a electric vehicles and
plug-in hybrid electric vehicles that is derived from electricity that
is generated from sources that are not onboard the vehicle, as
described in paragraphs (m)(1) through (3) of this section. For
purposes of labeling under this part, the CO2 emissions for
electric vehicles shall be 0 grams per mile. Similarly, for purposes of
labeling under this part, the CO2 emissions for plug-in
hybrid electric vehicles shall be 0 grams per mile for the proportion
of electric operation that is derived from electricity that is
generated from sources that are not onboard the vehicle. For
manufacturers no longer eligible to use 0 grams per mile to represent
electric operation, the provisions of this paragraph (m) shall be used
to determine the non-zero value for CREE for purposes of meeting the
greenhouse gas emission standards described in Sec. 86.1818 of this
chapter.
(1) For electric vehicles, but not including fuel cell vehicles,
the carbon-related exhaust emissions in grams per mile is to be
calculated using the following equation and rounded to the nearest one
gram per mile:
CREE = CREEUP - CREEGAS
Where:
CREE means the carbon-related exhaust emission value as defined in
Sec. 600.002, which may be set equal to zero for eligible 2012
through 2025 model year electric vehicles for a certain number of
vehicles produced and delivered for sale as described in Sec.
86.1866-12(a) of this chapter.
[GRAPHIC] [TIFF OMITTED] TP01DE11.734
Where:
EC = The vehicle energy consumption in watt-hours per mile,
determined according to procedures established by the Administrator
under Sec. 600.116-12.
GRIDLOSS = 0.93 (to account for grid transmission losses).
AVGUSUP = 0.642 for the 2012 through 2016 model years, and 0.574 for
2017 and later model years (the nationwide average electricity
greenhouse gas emission rate at the powerplant, in grams per watt-
hour).
TargetCO2 = The CO2Target Value determined
according to Sec. 86.1818 of this chapter for passenger automobiles
and light trucks, respectively.
(2) For plug-in hybrid electric vehicles the carbon-related exhaust
emissions in grams per mile is to be calculated according to the
provisions of Sec. 600.116, except that the CREE for charge-depleting
operation shall be the sum of the CREE associated with gasoline
consumption and the net upstream CREE determined according to paragraph
(m)(1)(i) of this section, rounded to the nearest one gram per mile.
(3) For 2012 and later model year fuel cell vehicles, the carbon-
related exhaust emissions in grams per mile shall be calculated using
the method specified in paragraph (m)(1) of this section, except that
CREEUP shall be determined according to procedures
established by the Administrator under Sec. 600.111-08(f). As
described in Sec. 86.1866 of this chapter the value of CREE may be set
equal to zero for a certain number of 2012 through 2025 model year fuel
cell vehicles.
* * * * *
22. Section 600.116-12 is amended as follows:
a. By revising the heading.
b. By revising paragraph (a) introductory text.
c. By adding paragraph (c).
The revisions and additions read as follows:
Sec. 600.116-12 Special procedures related to electric vehicles,
hybrid electric vehicles, and plug-in hybrid electric vehicles.
(a) Determine fuel economy values for electric vehicles as
specified in Sec. Sec. 600.210 and 600.311 using the procedures of SAE
J1634 (incorporated by reference in Sec. 600.011), with the follo wing
clarifications and modifications:
* * * * *
(c) Determining the proportion of recovered braking energy for
hybrid electric vehicles. Hybrid electric vehicles tested under this
part may determine the proportion of braking energy recovered over the
FTP relative to the total available braking energy required over the
FTP. This determination is required for pickup trucks accruing credits
for implementation of hybrid technology under Sec. 86. 1866-12(e)(2),
and requires the measurement of electrical current (in amps) flowing
into the hybrid system battery for the duration of the test.
(1) Calculate the theoretical maximum amount of energy that could
be recovered by a hybrid electric vehicle over the FTP test cycle,
where the test cycle time and velocity points are expressed at 10 Hz,
and the velocity (miles/hour) is expressed to the nearest 0.01 miles/
hour, as follows:
(i) For each time point in the 10 Hz test cycle (i.e., at each 0.1
seconds):
(A) Determine the road load power in kilowatts using the following
equation:
[[Page 75391]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.736
Where:
A, B, and C are the vehicle-specific dynamometer road load
coefficients in lb-force, lb-force/mph, and lb-force/mph\2\,
respectively; and
Vmph = velocity in miles/hour, expressed to the nearest
0.01 miles/hour.
(B) Determine the applied deceleration power in kilowatts using the
following equation. Positive values indicate acceleration and negative
values indicate deceleration.
[GRAPHIC] [TIFF OMITTED] TP01DE11.737
Where:
ETW = the vehicle Emission Test Weight (lbs);
V = velocity in miles/hour, rounded to the nearest 0.01 miles/hour;
Vt+1 = the velocity in miles/hour at the next time point
in the 10 Hz speed vs. time table, rounded to the nearest 0.01
miles/hour.
(C) Determine braking power in kilowatts using the following
equation.
[GRAPHIC] [TIFF OMITTED] TP01DE11.738
Where:
Paccel = the value determined in paragraph (c)(1)(i)(B)
of this section;
Proadload = the value determined in paragraph
(c)(1)(i)(A) of this section; and
Pbrake = 0 if Paccel is greater than or equal
to Proadload.
(ii) [Reserved]
(2) The total maximum braking energy (Ebrake) that could
theoretically be recovered is equal to the absolute value of the sum of
all the values of Pbrake determined in paragraph c)(1)(i)(C)
of this section, divided by 36,000 and rounded to the nearest 0.01
kilowatt hours.
(3) Calculate the actual amount of energy recovered by a hybrid
electric vehicle when tested on the FTP according to the provisions of
this part.
(i) Measure the state of charge, in Amp-hours, of the hybrid
battery system at each second of the FTP.
(ii) Calculate the change in the state of charge (current in Watt
hours) at each second of the test using the following equation:
[GRAPHIC] [TIFF OMITTED] TP01DE11.739
Where:
dSOC = the change in the state of charge of the hybrid battery
system, in Watt hours;
AHt = the state of charge of the battery system, in Amp
hours, at time t in the test;
AHt-1 = the state of charge of the battery system, in Amp
hours, at time t-1 in the test; and
V = the nominal voltage of the hybrid battery system.
(iii) Depending on the equipment and methodology used by a
manufacturer, batter charging during the test may be represented by
either a negative current or by a positive current. Determine the total
energy recovered by the hybrid battery system as follows:
(A) If battery charging is represented by positive current, then
the total energy recovered by the hybrid battery system, in kilowatt
hours, is the sum of the positive current values for each second of the
test determined in paragraph (c)(3)(ii) of this section, divided by
1,000 and rounded to the nearest 0.01 kilowatt hours.
(B) If battery charging is represented by negative current, then
the total energy recovered by the hybrid battery system, in kilowatt
hours, is the absolute value of the sum of the negative current values
for each second of the test determined in paragraph (c)(3)(ii) of this
section, divided by 1,000 and rounded to the nearest 0.01 kilowatt
hours.
(4) The percent of braking energy recovered by a hybrid system
relative to the total available energy is determined by the following
equation, rounded to the nearest one percent:
[GRAPHIC] [TIFF OMITTED] TP01DE11.740
Where:
Erec = The actual total energy recovered, in kilowatt
hours, as determined in paragraph (c)(2)(iii) of this section; and
Emax = The theoretical maximum amount of energy, in
kilowatt hours, that could be recovered by a hybrid electric vehicle
over the FTP test cycle, as determined in paragraph (c)(2) of this
section.
23. Section 600.303-12 is amended as follows:
a. By revising the introductory text.
b. By revising paragraph (b) introductory text.
c. By revising paragraph (b)(6).
d. By revising paragraph (c).
The revisions read as follows:
Sec. 600.303-12 Fuel economy label--special requirements for
flexible-fuel vehicles.
Fuel economy labels for flexible-fuel vehicles must meet the
specifications described in Sec. 600.302, with the modifications
described in this section. This section describes how to label
flexible-fuel vehicles equipped with gasoline engines. If the vehicle
has a diesel engine, all the references to ``gas'' or ``gasoline'' in
this section are understood to refer to ``diesel'' or ``diesel fuel'',
respectively. All values described in this section are based on
gasoline operation, unless otherwise specifically noted.
* * * * *
[[Page 75392]]
(b) Include the following elements instead of the information
identified in Sec. 600.302-12(c)(1):
* * * * *
(6) Add the following statement after the statements described in
Sec. 600.302-12(c)(2): ``Values are based on gasoline and do not
reflect performance and ratings based on E85.'' Adjust this statement
as appropriate for vehicles designed to operate on different fuels.
(c) You may include the sub-heading ``Driving Range'' below the
combined fuel economy value, with range bars below this sub-heading as
follows:
(1) Insert a horizontal range bar nominally 80 mm long to show how
far the vehicle can drive from a full tank of gasoline. Include a
vehicle logo at the right end of the range bar. Include the following
left-justified expression inside the range bar: ``Gasoline: x miles''.
Complete the expression by identifying the appropriate value for total
driving range from Sec. 600.311.
(2) Insert a second horizontal range bar as described in paragraph
(c)(1) of this section that shows how far the vehicle can drive from a
full tank with the second fuel. Establish the length of the line based
on the proportion of driving ranges for the different fuels. Identify
the appropriate fuel in the range bar.
24. Section 600.311-12 is amended as follows:
a. By revising paragraph (c)(1).
b. By revising paragraph (e)(3)(vii).
c. By adding paragraph (e)(4).
The revisions and addition read as follows:
Sec. 600.311-12 Determination of values for fuel economy labels.
* * * * *
(c) * * *
(1) For vehicles with engines that are not plug-in hybrid electric
vehicles, calculate the fuel consumption rate in gallons per 100 miles
(or gasoline gallon equivalent per 100 miles for fuels other than
gasoline or diesel fuel) with the following formula, rounded to the
first decimal place:
Fuel Consumption Rate = 100/MPG
Where:
MPG = The value for combined fuel economy from Sec. 600.210-12(c),
rounded to the nearest whole mpg.
* * * * *
(e) * * *
(3) * * *
(vii) Calculate the annual fuel cost based on the combined values
for city and highway driving using the following equation:
Annual fuel cost = ($/milecity x 0.55 + $/milehwy x 0.45) x Average
Annual Miles
(4) Round the annual fuel cost to the nearest $50 by dividing the
unrounded annual fuel cost by 50, then rounding the result to the
nearest whole number, then multiplying this rounded result by 50 to
determine the annual fuel cost to be used for purposes of labeling.
* * * * *
25. Section 600.510-12 is amended as follows:
a. By removing and reserving paragraph (b)(3)(iii).
b. By adding paragraph (b)(4).
c. By revising paragraph (c).
d. By revising paragraph (g)(1) introductory text.
e. By revising paragraph (g)(3).
f. By revising paragraph (h) introductory text.
g. By revising paragraph (j)(2)(vii).
h. By revising paragraph (k).
The addition and revisions read as follows:
Sec. 600.510-12 Calculation of average fuel economy and average
carbon-related exhaust emissions.
* * * * *
(b) * * *
(4) Emergency vehicles may be excluded from the fleet average
carbon-related exhaust emission calculations described in paragraph (j)
of this section. The manufacturer should notify the Administrator that
they are making such an election in the model year reports required
under Sec. 600.512 of this chapter. Such vehicles should be excluded
from both the calculation of the fleet average standard for a
manufacturer under 40 CFR 86.1818-12(c)(4) and from the calculation of
the fleet average carbon-related exhaust emissions in paragraph (j) of
this section.
(c)(1) Average fuel economy shall be calculated as follows:
(i) Except as allowed in paragraph (d) of this section, the average
fuel economy for the model years before 2017 will be calculated
individually for each category identified in paragraph (a)(1) of this
according to the provisions of paragraph (c)(2) of this section.
(ii) Except as permitted in paragraph (d) of this section, the
average fuel economy for the 2017 and later model years will be
calculated individually for each category identified in paragraph
(a)(1) of this section using the following equation:
[GRAPHIC] [TIFF OMITTED] TP01DE11.741
Where:
Average MPG = the fleet average fuel economy for a category of
vehicles;
MPG = the average fuel economy for a category of vehicles determined
according to paragraph (c)(2) of this section;
AC = Air conditioning fuel economy credits for a category of
vehicles, in gallons per mile, determined according to paragraph
(c)(3)(i) of this section;
OC = Off-cycle technology fuel economy credits for a category of
vehicles, in gallons per mile, determined according to paragraph
(c)(3)(ii) of this section; and
PU = Pickup truck fuel economy credits for the light truck category,
in gallons per mile, determined according to paragraph (c)(3)(iii)
of this section.
(2) Divide the total production volume of that category of
automobiles by a sum of terms, each of which corresponds to a model
type within that category of automobiles and is a fraction determined
by dividing the number of automobiles of that model type produced by
the manufacturer in the model year by:
(i) For gasoline-fueled and diesel-fueled model types, the fuel
economy calculated for that model type in accordance with paragraph
(b)(2) of this section; or
(ii) For alcohol-fueled model types, the fuel economy value
calculated for that model type in accordance with paragraph (b)(2) of
this section divided by 0.15 and rounded to the nearest 0.1 mpg; or
(iii) For natural gas-fueled model types, the fuel economy value
calculated for that model type in accordance with paragraph (b)(2) of
this section divided by 0.15 and rounded to the nearest 0.1 mpg; or
(iv) For alcohol dual fuel model types, for model years 1993
through 2019, the harmonic average of the following two terms; the
result rounded to the nearest 0.1 mpg:
[[Page 75393]]
(A) The combined model type fuel economy value for operation on
gasoline or diesel fuel as determined in Sec. 600.208-12(b)(5)(i); and
(B) The combined model type fuel economy value for operation on
alcohol fuel as determined in Sec. 600.208-12(b)(5)(ii) divided by
0.15 provided the requirements of paragraph (g) of this section are
met; or
(v) For alcohol dual fuel model types, for model years after 2019,
the combined model type fuel economy determined according to the
following equation and rounded to the nearest 0.1 mpg:
[GRAPHIC] [TIFF OMITTED] TP01DE11.742
Where:
F = 0.00 unless otherwise approved by the Administrator according to
the provisions of paragraph (k) of this section;
MPGA = The combined model type fuel economy for operation
on alcohol fuel as determined in Sec. 600.208-12(b)(5)(ii) divided
by 0.15 provided the requirements of paragraph (g) of this section
are met; and
MPGG = The combined model type fuel economy for operation
on gasoline or diesel fuel as determined in Sec. 600.208-
12(b)(5)(i).
(vi) For natural gas dual fuel model types, for model years 1993
through 2019, the harmonic average of the following two terms; the
result rounded to the nearest 0.1 mpg:
(A) The combined model type fuel economy value for operation on
gasoline or diesel as determined in Sec. 600.208-12(b)(5)(i); and
(B) The combined model type fuel economy value for operation on
natural gas as determined in Sec. 600.208-12(b)(5)(ii) divided by 0.15
provided the requirements of paragraph (g) of this section are met; or
(vii) For natural gas dual fuel model types, for model years after
2019, the combined model type fuel economy determined according to the
following formula and rounded to the nearest 0.1 mpg:
[GRAPHIC] [TIFF OMITTED] TP01DE11.743
Where:
MPGCNG = The combined model type fuel economy for
operation on natural gas as determined in Sec. 600.208-12(b)(5)(ii)
divided by 0.15 provided the requirements of paragraph (g) of this
section are met; and
MPGG = The combined model type fuel economy for operation
on gasoline or diesel fuel as determined in Sec. 600.208-
12(b)(5)(i).
UF = A Utility Factor (UF) value selected from the following table
based on the driving range of the vehicle while operating on natural
gas. Determine the vehicle's driving range in miles by multiplying
the combined fuel economy as determined in Sec. 600.208-
12(b)(5)(ii) by the vehicle's usable fuel storage capacity (as
defined at Sec. 600.002 and expressed in gasoline gallon
equivalents), and rounding to the nearest 10 miles.
[[Page 75394]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.744
[[Page 75395]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.745
(3) Fuel consumption improvement. Calculate the separate air
conditioning, off-cycle, and pickup truck fuel consumption improvement
as follows:
(i) Air conditioning fuel consumption improvements are calculated
separately for each category identified in paragraph (a)(1) of this
section using the following equation:
[GRAPHIC] [TIFF OMITTED] TP01DE11.746
Where:
FE Credit = the fleet production-weighted total value of air
conditioning efficiency credits for all air conditioning systems in
the applicable fleet, expressed in gallons per mile;
ACCredit = the total of all air conditioning efficiency credits for
the vehicle category, in megagrams, from 40 CFR 86.1866-12(c)(3);
VLM = vehicle lifetime miles, which for passenger automobiles shall
be 195,264 and for light trucks shall be 225,865; and
Production = the total production volume for the category of
vehicles (either passenger automobiles or light trucks).
(ii) Off-cycle technology fuel consumption improvements are
calculated separately for each category identified in paragraph (a)(1)
of this section using the following equation:
[GRAPHIC] [TIFF OMITTED] TP01DE11.747
Where:
FE Credit = the fleet production-weighted total value of off-cycle
technology credits for all off-cycle technologies in the applicable
fleet, expressed in gallons per mile;
OCCredit = the total of all off-cycle technology credits for the
vehicle category, in megagrams, from 40 CFR 86.1866-12(d)(5);
VLM = vehicle lifetime miles, which for passenger automobiles shall
be 195,264 and for light trucks shall be 225,865; and
Production = the total production volume for the category of
vehicles (either passenger automobiles or light trucks).
(iii) Full size pickup truck fuel consumption improvements are
calculated for the light truck category identified in paragraph (a)(1)
of this section using the following equation:
[GRAPHIC] [TIFF OMITTED] TP01DE11.748
[[Page 75396]]
Where:
FE Credit = the fleet production-weighted total value of full size
pickup truck credits for the light truck fleet, expressed in gallons
per mile;
PUCredit = the total of all full size pickup truck credits, in
megagrams, from 40 CFR 86.1866-12(e)(4); and
Production = the total production volume for the light truck
category.
* * * * *
(g)(1) Dual fuel automobiles must provide equal or greater energy
efficiency while operating on the alternative fuel as while operating
on gasoline or diesel fuel to obtain the CAFE credit determined in
paragraphs (c)(2)(iv) and (v) of this section or to obtain the carbon-
related exhaust emissions credit determined in paragraphs (j)(2)(ii)
and (iii) of this section. The following equation must hold true:
Ealt/Epet >= 1
Where:
Ealt = [FEalt/(NHValtx
Dalt)] x 10\6\ = energy efficiency while operating on
alternative fuel rounded to the nearest 0.01 miles/million BTU.
Epet = [FEpet/(NHVpetx
Dpet)] x 10\6\ = energy efficiency while operating on
gasoline or diesel (petroleum) fuel rounded to the nearest 0.01
miles/million BTU.
FEalt is the fuel economy [miles/gallon for liquid fuels
or miles/100 standard cubic feet for gaseous fuels] while operated
on the alternative fuel as determined in Sec. 600.113-12(a) and
(b).
FEpet is the fuel economy [miles/gallon] while operated
on petroleum fuel (gasoline or diesel) as determined in Sec.
600.113-12(a) and (b).
NHValt is the net (lower) heating value [BTU/lb] of the
alternative fuel.
NHVpet is the net (lower) heating value [BTU/lb] of the
petroleum fuel.
Dalt is the density [lb/gallon for liquid fuels or lb/100
standard cubic feet for gaseous fuels] of the alternative fuel.
Dpet is the density [lb/gallon] of the petroleum fuel.
* * * * *
(3) Dual fuel passenger automobiles manufactured during model years
1993 through 2019 must meet the minimum driving range requirements
established by the Secretary of Transportation (49 CFR part 538) to
obtain the CAFE credit determined in paragraphs (c)(2)(iv) and (v) of
this section.
(h) For model years 1993 and later, and for each category of
automobile identified in paragraph (a)(1) of this section, the maximum
increase in average fuel economy determined in paragraph (c) of this
section attributable to dual fuel automobiles, except where the
alternative fuel is electricity, shall be as follows:
[GRAPHIC] [TIFF OMITTED] TP01DE11.749
BILLING CODE 4910-59-C
* * * * *
(j) * * *
(2) * * *
(vii) For natural gas dual fuel model types, for model years 2016
and later, the combined model type carbon-related exhaust emissions
value determined according to the following formula and rounded to the
nearest gram per mile:
[GRAPHIC] [TIFF OMITTED] TP01DE11.750
Where:
CREECNG = The combined model type carbon-related exhaust emissions
value for operation on natural gas as determined in Sec. 600.208-
12(b)(5)(ii); and
CREEGAS = The combined model type carbon-related exhaust emissions
value for operation on gasoline or diesel fuel as determined in
Sec. 600.208-12(b)(5)(i).
UF = A Utility Factor (UF) value selected from the following table
based on the
[[Page 75397]]
driving range of the vehicle while operating on natural gas.
Determine the vehicle's driving range in miles by multiplying the
combined fuel economy as determined in Sec. 600.208-12(b)(5)(ii) by
the vehicle's usable fuel storage capacity (as defined at Sec.
600.002 and expressed in gasoline gallon equivalents), and rounding
to the nearest 10 miles.
[GRAPHIC] [TIFF OMITTED] TP01DE11.751
[[Page 75398]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.752
BILLING CODE 4910-59-C
(k) Alternative in-use weighting factors for dual fuel model types.
Using one of the methods in either paragraph (k)(1) or (2) of this
section, manufacturers may request the use of alternative values for
the weighting factor F in the equations in paragraphs (c)(2)(v) and
(j)(2)(vi) of this section. Unless otherwise approved by the
Administrator, the manufacturer must use the value of F that is in
effect in paragraphs (c)(2)(v) and (j)(2)(vi) of this section.
(1) Upon written request from a manufacturer, the Administrator
will determine and publish by written guidance an appropriate value of
F for each requested alternative fuel based on the Administrator's
assessment of real-world use of the alternative fuel. Such published
values would be available for any manufacturer to use. The
Administrator will periodically update these values upon written
request from a manufacturer.
(2) The manufacturer may optionally submit to the Administrator its
own demonstration regarding the real-world use of the alternative fuel
in their vehicles and its own estimate of the appropriate value of F in
the equations in paragraphs (c)(2)(v) and (j)(2)(vi) of this section.
Depending on the nature of the analytical approach, the manufacturer
could provide estimates of F that are model type specific or that are
generally applicable to the manufacturer's dual fuel fleet. The
manufacturer's analysis could include use of data gathered from on-
board sensors and computers, from dual fuel vehicles in fleets that are
centrally fueled, or from other sources. The analysis must be based on
sound statistical methodology and must account for analytical
uncertainty. Any approval by the Administrator will pertain to the use
of values of F for the model types specified by the manufacturer.
26. Section 600.514-12 is amended by revising paragraphs (b)(1)(v)
and (vii) and adding paragraphs (b)(1)(viii) and (ix) to read as
follows:
Sec. 600.514-12 Reports to the Environmental Protection Agency.
* * * * *
(b) * * *
(1) * * *
(v) A description of the various credit, transfer and trading
options that will be used to comply with each applicable standard
category, including the amount of credit the manufacturer intends to
generate for air conditioning leakage, air conditioning efficiency,
off-cycle technology, advanced technology vehicles, hybrid or low
emission full-size pickup trucks, and various early credit programs;
* * * * *
(vii) A summary by model year (beginning with the 2009 model year)
of the number of electric vehicles, fuel cell vehicles and plug-in
hybrid vehicles using (or projected to use) the advanced technology
vehicle credit and incentives program;
(viii) The methodology which will be used to comply with
N2O and CH4 emission standards;
(ix) Notification of the manufacturer's intent to exclude emergency
vehicles from the calculation of fleet average standards and the end-
of-year fleet average, including a description of the excluded
emergency vehicles and the quantity of such vehicles excluded.
* * * * *
Title 49
National Highway Traffic Safety Administration
In consideration of the foregoing, under the authority of 49 U.S.C.
32901, 32902, and 32903, and delegation of authority at 49 CFR 1.50,
NHTSA proposes to amend 49 CFR Chapter V as follows:
PART 523--VEHICLE CLASSIFICATION
27. The authority citation for part 523 continues to read as
follows:
Authority: 49 U.S.C. 32901, delegation of authority at 49 CFR
1.50.
28. Revise Sec. 523.2 to read as follows:
Sec. 523.2 Definitions.
Approach angle means the smallest angle, in a plane side view of an
automobile, formed by the level surface
[[Page 75399]]
on which the automobile is standing and a line tangent to the front
tire static loaded radius arc and touching the underside of the
automobile forward of the front tire.
Axle clearance means the vertical distance from the level surface
on which an automobile is standing to the lowest point on the axle
differential of the automobile.
Base tire (for passenger automobiles, light trucks, and medium duty
passenger vehicles) means the tire that has the highest production
sales volume that is installed by the vehicle manufacturer on each
vehicle configuration of a model type.
Basic vehicle frontal area is used as defined in 40 CFR 86.1803.
Breakover angle means the supplement of the largest angle, in a
plan side view of an automobile, that can be formed by two lines
tangent to the front and rear static loaded radii arcs and intersecting
at a point on the underside of the automobile.
Cab-complete vehicle means a vehicle that is first sold as an
incomplete vehicle that substantially includes the vehicle cab section
as defined in 40 CFR 1037.801. For example, vehicles known commercially
as chassis-cabs, cab-chassis, box-deletes, bed-deletes, and cut-away
vans are considered cab-complete vehicles. A cab includes a steering
column and a passenger compartment. Note that a vehicle lacking some
components of the cab is a cab-complete vehicle if it substantially
includes the cab.
Cargo-carrying volume means the luggage capacity or cargo volume
index, as appropriate, and as those terms are defined in 40 CFR
600.315-08, in the case of automobiles to which either of these terms
apply. With respect to automobiles to which neither of these terms
apply, ``cargo-carrying volume'' means the total volume in cubic feet,
rounded to the nearest 0.1 cubic feet, of either an automobile's
enclosed non-seating space that is intended primarily for carrying
cargo and is not accessible from the passenger compartment, or the
space intended primarily for carrying cargo bounded in the front by a
vertical plane that is perpendicular to the longitudinal centerline of
the automobile and passes through the rearmost point on the rearmost
seat and elsewhere by the automobile's interior surfaces.
Class 2b vehicles are vehicles with a gross vehicle weight rating
(GVWR) ranging from 8,501 to 10,000 pounds (lbs).
Class 3 through Class 8 vehicles are vehicles with a GVWR of 10,001
lbs or more, as defined in 49 CFR 565.15.
Commercial medium- and heavy-duty on-highway vehicle means an on-
highway vehicle with a GVWR of 10,000 lbs or more, as defined in 49
U.S.C. 32901(a)(7).
Complete vehicle means a vehicle that requires no further
manufacturing operations to perform its intended function and is a
functioning vehicle that has the primary load-carrying device or
container (or equivalent equipment) attached or is designed to pull a
trailer. Examples of equivalent equipment include fifth wheel trailer
hitches, firefighting equipment, and utility booms.
Curb weight is defined the same as vehicle curb weight in 40 CFR
86.1803-01.
Departure angle means the smallest angle, in a plane side view of
an automobile, formed by the level surface on which the automobile is
standing and a line tangent to the rear tire static loaded radius arc
and touching the underside of the automobile rearward of the rear tire.
Final stage manufacturer has the meaning given in 49 CFR 567.3.
Footprint is defined as the product of track width (measured in
inches, calculated as the average of front and rear track widths, and
rounded to the nearest tenth of an inch) times wheelbase (measured in
inches and rounded to the nearest tenth of an inch), divided by 144 and
then rounded to the nearest tenth of a square foot. For purposes of
this definition, ``track width'' is the lateral distance between the
centerlines of the base tires at ground, including the camber angle.
For purposes of this definition, ``wheelbase'' is the longitudinal
distance between front and rear wheel centerlines.
Full-size pickup truck means a light truck or medium duty passenger
vehicle that meets the requirements specified in 40 CFR 86.1866-12(e).
Gross combination weight rating (GCWR) means the value specified by
the manufacturer as the maximum allowable loaded weight of a
combination vehicle (e.g., tractor plus trailer).
Gross vehicle weight rating (GVWR) means the value specified by the
manufacturer as the maximum design loaded weight of a single vehicle
(e.g., vocational vehicle).
Heavy-duty engine means any engine used for (or which the engine
manufacturer could reasonably expect to be used for) motive power in a
heavy-duty vehicle. For purposes of this definition in this part, the
term ``engine'' includes internal combustion engines and other devices
that convert chemical fuel into motive power. For example, a fuel cell
and motor used in a heavy-duty vehicle is a heavy-duty engine.
Heavy-duty off-road vehicle means a heavy-duty vocational vehicle
or vocational tractor that is intended for off-road use meeting either
of the following criteria:
(1) Vehicles with tires installed having a maximum speed rating at
or below 55 mph.
(2) Vehicles primarily designed to perform work off-road (such as
in oil fields, forests, or construction sites), and meeting at least
one of the criteria of paragraph (2)(i) of this definition and at least
one of the criteria of paragraph (2)(ii) of this definition.
(i) Vehicles must have affixed components designed to work in an
off-road environment (for example, hazardous material equipment or
drilling equipment) or be designed to operate at low speeds making them
unsuitable for normal highway operation.
(ii) Vehicles must:
(A) Have an axle that has a gross axle weight rating (GAWR), as
defined in 49 CFR 571.3, of 29,000 pounds or more;
(B) Have a speed attainable in 2 miles of not more than 33 mph; or
(C) Have a speed attainable in 2 miles of not more than 45 mph, an
unloaded vehicle weight that is not less than 95 percent of its GVWR,
and no capacity to carry occupants other than the driver and operating
crew.
Heavy-duty vehicle means a vehicle as defined in Sec. 523.6.
Incomplete vehicle means a vehicle which does not have the primary
load carrying device or container attached when it is first sold as a
vehicle or any vehicle that does not meet the definition of a complete
vehicle. This may include vehicles sold to secondary vehicle
manufacturers. Incomplete vehicles include cab-complete vehicles.
Innovative technology means technology certified as such under 40
CFR 1037.610.
Light truck means a non-passenger automobile as defined in Sec.
523.5.
Medium duty passenger vehicle means a vehicle which would satisfy
the criteria in Sec. 523.5 (relating to light trucks) but for its
gross vehicle weight rating or its curb weight, which is rated at more
than 8,500 lbs GVWR or has a vehicle curb weight of more than 6,000 lbs
or has a basic vehicle frontal area in excess of 45 square feet, and
which is designed primarily to transport passengers, but does not
include a vehicle that:
(1) Is an ``incomplete vehicle''' as defined in this subpart; or
[[Page 75400]]
(2) Has a seating capacity of more than 12 persons; or
(3) Is designed for more than 9 persons in seating rearward of the
driver's seat; or
(4) Is equipped with an open cargo area (for example, a pick-up
truck box or bed) of 72.0 inches in interior length or more. A covered
box not readily accessible from the passenger compartment will be
considered an open cargo area for purposes of this definition.
Mild hybrid gasoline-electric vehicle means a vehicle as defined by
EPA in 40 CFR 86.1866-12(e).
Motor home has the meaning given in 49 CFR 571.3.
Motor vehicle has the meaning given in 40 CFR 85.1703.
Passenger-carrying volume means the sum of the front seat volume
and, if any, rear seat volume, as defined in 40 CFR 600.315-08, in the
case of automobiles to which that term applies. With respect to
automobiles to which that term does not apply, ``passenger-carrying
volume'' means the sum in cubic feet, rounded to the nearest 0.1 cubic
feet, of the volume of a vehicle's front seat and seats to the rear of
the front seat, as applicable, calculated as follows with the head
room, shoulder room, and leg room dimensions determined in accordance
with the procedures outlined in Society of Automotive Engineers
Recommended Practice J1100a, Motor Vehicle Dimensions (Report of Human
Factors Engineering Committee, Society of Automotive Engineers,
approved September 1973 and last revised September 1975).
(1) For front seat volume, divide 1,728 into the product of the
following SAE dimensions, measured in inches to the nearest 0.1 inches,
and round the quotient to the nearest 0.001 cubic feet.
(i) H61-Effective head room--front.
(ii) W3--Shoulder room--front.
(iii) L34--Maximum effective leg room-accelerator.
(2) For the volume of seats to the rear of the front seat, divide
1,728 into the product of the following SAE dimensions, measured in
inches to the nearest 0.1 inches, and rounded the quotient to the
nearest 0.001 cubic feet.
(i) H63--Effective head room--second.
(ii) W4--Shoulder room--second.
(iii) L51--Minimum effective leg room--second.
Pickup truck means a non-passenger automobile which has a passenger
compartment and an open cargo area (bed).
Recreational vehicle or RV means a motor vehicle equipped with
living space and amenities found in a motor home.
Running clearance means the distance from the surface on which an
automobile is standing to the lowest point on the automobile, excluding
unsprung weight.
Static loaded radius arc means a portion of a circle whose center
is the center of a standard tire-rim combination of an automobile and
whose radius is the distance from that center to the level surface on
which the automobile is standing, measured with the automobile at curb
weight, the wheel parallel to the vehicle's longitudinal centerline,
and the tire inflated to the manufacturer's recommended pressure.
Strong hybrid gasoline-electric vehicle means a vehicle as defined
by EPA in 40 CFR 86.1866-12(e).
Temporary living quarters means a space in the interior of an
automobile in which people may temporarily live and which includes
sleeping surfaces, such as beds, and household conveniences, such as a
sink, stove, refrigerator, or toilet.
Van means a vehicle with a body that fully encloses the driver and
a cargo carrying or work performing compartment. The distance from the
leading edge of the windshield to the foremost body section of vans is
typically shorter than that of pickup trucks and sport utility
vehicles.
Vocational tractor means a tractor that is classified as a
vocational vehicle according to 40 CFR 1037.630.
Vocational vehicle means a vehicle that is equipped for a
particular industry, trade or occupation such as construction, heavy
hauling, mining, logging, oil fields, refuse and includes vehicles such
as school buses, motorcoaches and RVs.
Work truck means a vehicle that is rated at more than 8,500 pounds
and less than or equal to 10,000 pounds gross vehicle weight, and is
not a medium-duty passenger vehicle as defined in 40 CFR 86.1803
effective as of December 20, 2007.
PART 531--PASSENGER AUTOMOBILE AVERAGE FUEL ECONOMY STANDARDS
29. The authority citation for part 531 continues to read as
follows:
Authority: 49 U.S.C. 32902; delegation of authority at 49 CFR
1.50.
30. Amend Sec. 531.5 by revising paragraph (a) Introductory text,
revising paragraphs (b), (c), and (d), redesignating paragraph (e) as
paragraph (f), and adding a new paragraph (e) to read as follows:
Sec. 531.5 Fuel economy standards.
(a) Except as provided in paragraph (e) of this section, each
manufacturer of passenger automobiles shall comply with the fleet
average fuel economy standards in Table I, expressed in miles per
gallon, in the model year specified as applicable:
* * * * *
(b) For model year 2011, a manufacturer's passenger automobile
fleet shall comply with the fleet average fuel economy level calculated
for that model year according to Figure 1 and the appropriate values in
Table II.
[GRAPHIC] [TIFF OMITTED] TP01DE11.753
Where:
N is the total number (sum) of passenger automobiles produced by a
manufacturer;
Ni is the number (sum) of the ith passenger automobile model
produced by the manufacturer; and
[[Page 75401]]
Ti is the fuel economy target of the ith model passenger
automobile, which is determined according to the following formula,
rounded to the nearest hundredth:
[GRAPHIC] [TIFF OMITTED] TP01DE11.754
Where:
Parameters a, b, c, and d are defined in Table II;
e = 2.718; and
x = footprint (in square feet, rounded to the nearest tenth) of the
vehicle model.
[GRAPHIC] [TIFF OMITTED] TP01DE11.755
(c) For model years 2012-2025, a manufacturer's passenger
automobile fleet shall comply with the fleet average fuel economy level
calculated for that model year according to Figure 2 and the
appropriate values in Table III.
[GRAPHIC] [TIFF OMITTED] TP01DE11.756
Where:
CAFErequired is the fleet average fuel economy standard for a given
fleet (domestic passenger automobiles or import passenger
automobiles);
Subscript i is a designation of multiple groups of automobiles,
where each group's designation, i.e., i = 1, 2, 3, etc., represents
automobiles that share a unique model type and footprint within the
applicable fleet, either domestic passenger automobiles or import
passenger automobiles;
Productioni is the number of passenger automobiles produced for sale
in the United States within each ith designation, i.e., which share
the same model type and footprint;
TARGETi is the fuel economy target in miles per gallon (mpg)
applicable to the footprint of passenger automobiles within each ith
designation, i.e., which share the same model type and footprint,
calculated according to Figure 3 and rounded to the nearest
hundredth of a mpg, i.e., 35.455 = 35.46 mpg, and the summations in
the numerator and denominator are both performed over all models in
the fleet in question.
Figure 3:
[GRAPHIC] [TIFF OMITTED] TP01DE11.757
[[Page 75402]]
Where:
TARGET is the fuel economy target (in mpg) applicable to vehicles of
a given footprint (FOOTPRINT, in square feet);
Parameters a, b, c, and d are defined in Table III; and
The MIN and MAX functions take the minimum and maximum,
respectively, of the included values.
BILLING CODE 4910-59-P
[GRAPHIC] [TIFF OMITTED] TP01DE11.758
(d) In addition to the requirements of paragraphs (b) and (c) of
this section, each manufacturer shall also meet the minimum fleet
standard for domestically manufactured passenger automobiles expressed
in Table IV:
[[Page 75403]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.759
(e) For model years 2022-2025, each manufacturer shall comply with
the standards set forth in paragraphs (c) and (d) in this section, if
NHTSA determines in a rulemaking, initiated after January 1, 2017, and
conducted in accordance with 49 U.S.C. 32902, that the standards in
paragraphs (c) and (d) are the maximum feasible standards for model
years 2022-2025. If, for any of those model years, NHTSA determines
that the maximum feasible standard for passenger cars and the
corresponding minimum standard for domestically manufactured passenger
cars should be set at a different level, manufacturers shall comply
with those different standards in lieu of the standards set forth for
those model years in paragraphs (c) and (d), and NHTSA will revise this
section to reflect the different standards.
* * * * *
31. Amend Sec. 531.6 by revising paragraph (a) to read as follows:
Sec. 531.6 Measurement and calculation procedures.
(a) The fleet average fuel economy performance of all passenger
automobiles that are manufactured by a manufacturer in a model year
shall be determined in accordance with procedures established by the
Administrator of the Environmental Protection Agency under 49 U.S.C.
32904 and set forth in 40 CFR part 600. For model years 2017 to 2025, a
manufacturer is eligible to increase the fuel economy performance of
passenger cars in accordance with procedures established by EPA set
forth in 40 CFR part 600, including any adjustments to fuel economy EPA
allows, such as for fuel consumption improvements related
[[Page 75404]]
to air conditioning efficiency and off-cycle technologies.
* * * * *
32. Revise Appendix A to part 531 to read as follows:
Appendix to Part 531--Example of Calculating Compliance Under Sec.
531.5(c)
Assume a hypothetical manufacturer (Manufacturer X) produces a
fleet of domestic passenger automobiles in MY 2012 as follows:
[GRAPHIC] [TIFF OMITTED] TP01DE11.760
[[Page 75405]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.761
[[Page 75406]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.762
BILLING CODE 4910-59-C
[[Page 75407]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.763
[[Page 75408]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.764
PART 533--LIGHT TRUCK FUEL ECONOMY STANDARDS
33. The authority citation for part 531 continues to read as
follows:
Authority: 49 U.S.C. 32902; delegation of authority at 49 CFR
1.50.
34. Amend Sec. 533.5 by revising paragraphs (a), (f), (g), (h),
(i) and adding paragraphs (j) and (k) to read as follows:
Sec. 533.5 Requirements.
(a) Each manufacturer of light trucks shall comply with the
following fleet average fuel economy standards, expressed in miles per
gallon, in the model year specified as applicable:
BILLING CODE 4910-59-P
[[Page 75409]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.765
[GRAPHIC] [TIFF OMITTED] TP01DE11.766
[[Page 75410]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.767
[[Page 75411]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.768
Where:
N is the total number (sum) of light trucks produced by a
manufacturer;
Ni is the number (sum) of the ith light truck model type
produced by a manufacturer; and
Ti is the fuel economy target of the ith light truck
model type, which is determined according to the following formula,
rounded to the nearest hundredth:
[GRAPHIC] [TIFF OMITTED] TP01DE11.769
Where:
Parameters a, b, c, and d are defined in Table V;
e = 2.718; and
x = footprint (in square feet, rounded to the nearest tenth) of the
model type.
[GRAPHIC] [TIFF OMITTED] TP01DE11.770
Where:
CAFErequired is the fleet average fuel economy standard for a given
light truck fleet;
Subscript i is a designation of multiple groups of light trucks,
where each group's designation, i.e., i = 1, 2, 3, etc., represents
light trucks that share a unique model type and footprint within the
applicable fleet.
Productioni is the number of light trucks produced for sale in the
United States within each ith designation, i.e., which share the
same model type and footprint;
TARGETi is the fuel economy target in miles per gallon (mpg)
applicable to the footprint of light trucks within each ith
designation, i.e., which share the same model type and footprint,
calculated according to either Figure 3 or Figure 4, as appropriate,
and rounded to the nearest hundredth of a mpg, i.e., 35.455 = 35.46
mpg, and the summations in the numerator and denominator are both
performed over all models in the fleet in question.
[[Page 75412]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.771
Where:
TARGET is the fuel economy target (in mpg) applicable to vehicles of
a given footprint (FOOTPRINT, in square feet);
Parameters a, b, c, and d are defined in Table VI; and
The MIN and MAX functions take the minimum and maximum,
respectively, of the included values.
[GRAPHIC] [TIFF OMITTED] TP01DE11.772
[[Page 75413]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.773
* * * * *
(f) For each model year 1996 and thereafter, each manufacturer
shall combine its captive imports with its other light trucks and
comply with the fleet average fuel economy standard in paragraph (a) of
this section.
(g) For model years 2008-2010, at a manufacturer's option, a
manufacturer's light truck fleet may comply with the fuel economy
standard calculated for each model year according to Figure 1 and the
appropriate values in Table V, with said option being irrevocably
chosen for that model year and reported as specified in Sec. 537.8.
(h) For model year 2011, a manufacturer's light truck fleet shall
comply with the fleet average fuel economy standard calculated for that
model year according to Figure 1 and the appropriate values in Table V.
(i) For model years 2012-2016, a manufacturer's light truck fleet
shall comply with the fleet average fuel economy standard calculated
for that model year according to Figures 2 and 3 and the appropriate
values in Table VI.
(j) For model years 2017-2025, a manufacturer's light truck fleet
shall comply with the fleet average fuel economy standard calculated
for that model year according to Figures 2 and 4 and the appropriate
values in Table VII.
(k) For model years 2022-2025, each manufacturer shall comply with
the standards set forth in paragraph (j) of this section, if NHTSA
determines in a rulemaking, initiated after January 1, 2017, and
conducted in accordance with 49 U.S.C. 32902, that the standards in
paragraph (j) are the maximum feasible standards for model years 2022-
2025. If, for any of those model years, NHTSA determines that the
maximum feasible standard for light trucks should be set at a different
level, manufacturers shall comply with those different standards in
lieu of the standards set forth for those model years in paragraph (j),
and NHTSA will revise this section to reflect the different standards.
* * * * *
35. Amend Sec. 533.6 by revising paragraph (b) to read as follows:
Sec. 533.6 Measurement and calculation procedures.
* * * * *
(b) The fleet average fuel economy performance of all vehicles
subject to part 533 that are manufactured by a manufacturer in a model
year shall be determined in accordance with procedures established by
the Administrator of the Environmental Protection Agency under 49
U.S.C. 32904 and set forth in 40 CFR part 600. For model years 2017 to
2025, a manufacturer is eligible to increase the fuel economy
performance of light trucks in accordance with procedures established
by EPA and set forth in 40 CFR part 600, including any adjustments to
fuel economy EPA allows, such as for fuel consumption improvements
related to air conditioning efficiency, off-cycle technologies, and
hybridization and other over-compliance for full-size pickup trucks.
36. Redesignate Appendix A to part 533 as Appendix to part 533 and
revise it to read as follows:
[[Page 75414]]
Appendix to Part 533--Example of Calculating Compliance Under Sec.
533.5(i)
Assume a hypothetical manufacturer (Manufacturer X) produces a
fleet of light trucks in MY 2012 as follows:
[GRAPHIC] [TIFF OMITTED] TP01DE11.775
[[Page 75415]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.776
[[Page 75416]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.777
[[Page 75417]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.778
[GRAPHIC] [TIFF OMITTED] TP01DE11.779
[[Page 75418]]
[GRAPHIC] [TIFF OMITTED] TP01DE11.780
Where:
TARGET is the fuel economy target (in mpg) applicable to vehicles of
a given footprint (FOOTPRINT, in square feet);
Parameters a, b, c, d, e, f, g, and h are defined in Table VII; and
The MIN and MAX functions take the minimum and maximum,
respectively, of the included values.
PART 536--TRANSFER AND TRADING OF FUEL ECONOMY CREDITS
37. Revise the authority citation for part 536 to read as follows:
Authority: 49 U.S.C. 32903; delegation of authority at 49 CFR
1.50.
38. Amend Sec. 536.4 by revising paragraph (c) to read as follows:
Sec. 536.4 Credits.
* * * * *
(c) Adjustment factor. When traded or transferred and used, fuel
economy credits are adjusted to ensure fuel oil savings is preserved.
For traded credits, the user (or buyer) must multiply the calculated
adjustment factor by the number of its shortfall credits it plans to
offset in order to determine the number of equivalent credits to
acquire from the earner (or seller). For transferred credits, the user
of credits must multiply the calculated adjustment factor by the number
of its shortfall credits it plans to
[[Page 75419]]
offset in order to determine the number of equivalent credits to
transfer from the compliance category holding the available credits.
The adjustment factor is calculated according to the following formula:
[GRAPHIC] [TIFF OMITTED] TP01DE11.781
Where:
A = Adjustment factor applied to traded and transferred credits;
VMTe = Lifetime vehicle miles traveled as provided in the
following table for the model year and compliance category in which
the credit was earned;
VMTu = Lifetime vehicle miles traveled as provided in the
following table for the model year and compliance category in which
the credit is used for compliance;
[GRAPHIC] [TIFF OMITTED] TP01DE11.782
MPGse = Required fuel economy standard for the originating (earning)
manufacturer, compliance category, and model year in which the
credit was earned;
MPGae = Actual fuel economy for the originating manufacturer,
compliance category, and model year in which the credit was earned;
MPGsu = Required fuel economy standard for the user (buying)
manufacturer, compliance category, and model year in which the
credit is used for compliance; and
MPGau = Actual fuel economy for the user manufacturer, compliance
category, and model year in which the credit is used for compliance.
39. Amend Sec. 536.9 by revising paragraph (c) to read as follows:
Sec. 536.9 Use of credits with regard to the domestically
manufactured passenger automobile minimum standard.
* * * * *
(c) Transferred or traded credits may not be used, pursuant to 49
U.S.C. 32903(g)(4) and (f)(2), to meet the domestically manufactured
passenger automobile minimum standard specified in 49 U.S.C.
32902(b)(4) and in 49 CFR 531.5(d).
* * * * *
40. Amend Sec. 536.10 by revising the section heading and
paragraphs (b) and (c) and adding paragraph (d) to read as follows:
Sec. 536.10 Treatment of dual-fuel and alternative-fuel vehicles.
* * * * *
(b) If a manufacturer's calculated fuel economy for a particular
compliance category, including any statutorily-required calculations
for alternative fuel and dual fuel vehicles, is higher or lower than
the applicable fuel economy standard, manufacturers will earn credits
or must apply credits or pay civil penalties equal to the difference
between the calculated fuel economy level in that compliance category
and the applicable standard. Credits earned are the same as any other
credits, and may be held, transferred, or traded by the manufacturer
subject to the limitations of the statute and this regulation.
(c) For model years up to and including MY 2019, if a manufacturer
builds enough dual fuel vehicles (except plug-in electric vehicles) to
improve the calculated fuel economy in a particular compliance category
by more than the limits set forth in 49 U.S.C. 32906(a), the
improvement in fuel economy for compliance purposes is restricted to
the statutory limit. Manufacturers may not earn credits nor reduce the
application of credits or fines for calculated improvements in fuel
economy based on dual fuel vehicles beyond the statutory limit.
(d) For model years 2020 and beyond, a manufacturer must calculate
the fuel economy of dual fueled vehicles in accordance with 40 CFR
600.510-12(c)(2)(v) and (vii).
PART 537--AUTOMOTIVE FUEL ECONOMY REPORTS
41. The authority citation for part 537 continues to read as
follows:
Authority: 49 U.S.C. 32907, delegation of authority at 49 CFR
1.50.
42. Amend Sec. 537.5 by revising paragraph (c)(4) to read as
follows:
* * * * *
(c) * * *
(4) Be submitted on CD or by email with the contents in a pdf or MS
Word format except the information required in 537.7 must be provided
in a MS Excel format. Submit 2 copies of the CD to: Administrator,
National Highway Traffic Administration, 1200 New Jersey Avenue SW.,
Washington, DC 20590, or submit reports electronically to the following
secure email address: [email protected];
* * * * *
43. Amend Sec. 537.7 by revising paragraphs (b)(3), (c)(4), and
(c)(5) to read as follows:
Sec. 537.7 Pre-model year and mid-model year reports.
* * * * *
(b) * * *
(3) State the projected required fuel economy for the
manufacturer's passenger automobiles and light trucks
[[Page 75420]]
determined in accordance with 49 CFR 531.5(c) and 49 CFR 533.5 and
based upon the projected sales figures provided under paragraph (c)(2)
of this section. For each unique model type and footprint combination
of the manufacturer's automobiles, provide the information specified in
paragraph (b)(3)(i) and (ii) of this section in tabular form. List the
model types in order of increasing average inertia weight from top to
bottom down the left side of the table and list the information
categories in the order specified in paragraphs (i) and (ii) of this
section from left to right across the top of the table. Other formats,
such as those accepted by EPA, which contain all of the information in
a readily identifiable format are also acceptable.
(i) In the case of passenger automobiles:
(A) Beginning model year 2013, base tire as defined in 49 CFR
523.2,
(B) Beginning model year 2013, front axle, rear axle and average
track width as defined in 49 CFR 523.2,
(C) Beginning model year 2013, wheelbase as defined in 49 CFR
523.2, and
(D) Beginning model year 2013, footprint as defined in 49 CFR
523.2.
(ii) In the case of light trucks:
(A) Beginning model year 2013, base tire as defined in 49 CFR
523.2,
(B) Beginning model year 2013, front axle, rear axle and average
track width as defined in 49 CFR 523.2,
(C) Beginning model year 2013, wheelbase as defined in 49 CFR
523.2, and
(D) Beginning model year 2013, footprint as defined in 49 CFR
523.2.
* * * * *
(c) * * *
(4) (i) Loaded vehicle weight;
(ii) Equivalent test weight;
(iii) Engine displacement, liters;
(iv) SAE net rated power, kilowatts;
(v) SAE net horsepower;
(vi) Engine code;
(vii) Fuel system (number of carburetor barrels or, if fuel
injection is used, so indicate);
(viii) Emission control system;
(ix) Transmission class;
(x) Number of forward speeds;
(xi) Existence of overdrive (indicate yes or no);
(xii) Total drive ratio (N/V);
(xiii) Axle ratio;
(xiv) Combined fuel economy;
(xv) Projected sales for the current model year;
(xvi) Air conditioning efficiency improvement technologies used to
acquire the incentive in 40 CFR 86.1866 and the amount of the
incentive;
(xvii) Full-size pickup truck technologies used to acquire the
incentive in 40 CFR 86.1866 and the amount of the incentive;
(xviii) Off-cycle technologies used to acquire the incentive in 40
CFR 86.1866 and the amount of the incentive;
(xix) (A) In the case of passenger automobiles:
(1) Interior volume index, determined in accordance with subpart D
of 40 CFR part 600;
(2) Body style;
(B) In the case of light trucks:
(1) Passenger-carrying volume;
(2) Cargo-carrying volume;
(xx) Frontal area;
(xxi) Road load power at 50 miles per hour, if determined by the
manufacturer for purposes other than compliance with this part to
differ from the road load setting prescribed in 40 CFR 86.177-11(d);
(xxii) Optional equipment that the manufacturer is required under
40 CFR parts 86 and 600 to have actually installed on the vehicle
configuration, or the weight of which must be included in the curb
weight computation for the vehicle configuration, for fuel economy
testing purposes.
(5) For each model type of automobile which is classified as a non-
passenger vehicle (light truck) under part 523 of this chapter, provide
the following data:
(i) For an automobile designed to perform at least one of the
following functions in accordance with 523.5 (a) indicate (by ``yes''
or ``no'') whether the vehicle can:
(A) Transport more than 10 persons (if yes, provide actual
designated seating positions);
(B) Provide temporary living quarters (if yes, provide applicable
conveniences as defined in 523.2);
(C) Transport property on an open bed (if yes, provide bed size
width and length);
(D) Provide, as sold to the first retail purchaser, greater cargo-
carrying than passenger-carrying volume, such as in a cargo van and
quantify the value; if a vehicle is sold with a second-row seat, its
cargo-carrying volume is determined with that seat installed,
regardless of whether the manufacturer has described that seat as
optional; or
(E) Permit expanded use of the automobile for cargo-carrying
purposes or other non passenger-carrying purposes through:
(1) For non-passenger automobiles manufactured prior to model year
2012, the removal of seats by means installed for that purpose by the
automobile's manufacturer or with simple tools, such as screwdrivers
and wrenches, so as to create a flat, floor level, surface extending
from the forward-most point of installation of those seats to the rear
of the automobile's interior; or
(2) For non-passenger automobiles manufactured in model year 2008
and beyond, for vehicles equipped with at least 3 rows of designated
seating positions as standard equipment, permit expanded use of the
automobile for cargo-carrying purposes or other nonpassenger-carrying
purposes through the removal or stowing of foldable or pivoting seats
so as to create a flat, leveled cargo surface extending from the
forward-most point of installation of those seats to the rear of the
automobile's interior.
(ii) For an automobile capable of off-highway operation, identify
which of the features below qualify the vehicle as off-road in
accordance with 523.5 (b) and quantify the values of each feature:
(A) 4-wheel drive; or
(B) A rating of more than 6,000 pounds gross vehicle weight; and
(C) Has at least four of the following characteristics calculated
when the automobile is at curb weight, on a level surface, with the
front wheels parallel to the automobile's longitudinal centerline, and
the tires inflated to the manufacturer's recommended pressure. The
exact value of each feature should be quantified:
(1) Approach angle of not less than 28 degrees.
(2) Breakover angle of not less than 14 degrees.
(3) Departure angle of not less than 20 degrees.
(4) Running clearance of not less than 20 centimeters.
(5) Front and rear axle clearances of not less than 18 centimeters
each.
* * * * *
44. Amend Sec. 537.8 by revising paragraph (a)(3) to read as
follows:
Sec. 537.8 Supplementary reports.
(a) * * *
(3) Each manufacturer whose pre-model year report omits any of the
information specified in Sec. 537.7 (b), (c)(1) and (2), or (c)(4)
shall file a supplementary report containing the information specified
in paragraph (b)(3) of this section.
* * * * *
Dated: November 16, 2011.
Ray LaHood,
Secretary, Department of Transportation.
Dated: November 16, 2011.
Lisa P. Jackson,
Administrator, Environmental Protection Agency.
[FR Doc. 2011-30358 Filed 11-30-11; 8:45 am]
BILLING CODE 4910-59-P